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NOTES  AND  OPINIONS 


ON 


Certain  Aspects  of  Insurance 


UNDER   THE 


Foreign  Compensation  Laws 


Of 

UNIVE; 

, 


BY 

P.   TECUMSEH   SHERMAN 
of  the  New  York  Bar 


NOTES  AND  OPINIONS 


Certain  Aspects  of  Insurance 


UNDER   THE 


Foreign  Compensation  Laws 


P.  TECUMSEH   SHERMAN 


HARTFORD  PRESS 

THE  CASE,  LOCKWOOD  &  BBAINABD  COMPANY 
1912 


OF    P*OF. 


WILLIAM  BROSMITH,  ESQ.,  Manager, 

Bureau  of  Publicity-Casualty  Insurance, 

TOO  Main  Street,  Hartford,  Conn. 
Dear  Sir : 

In  compliance  with  your  request  for  a  critical  analysis  of 
the  foreign  workmen's  accident  compensation  laws  in  their  in- 
surance aspects  and  for  my  opinion  as  to  their  respective  merits 
and  demerits  with  reference  to  their  adaptability  to  conditions 
in  this  country,  I  submit  the  following.  For  convenience  of 
reference  the  matter  is  arranged  under  principal  topics. 

Yours  very  truly, 

P.  TECUMSEH  SHERMAN. 
K"ew  York,  June  24,  1912. 


Notes  and  Opinions  on  Certain  Aspects  of  Insuranc 
Under  the  Foreign  Compensation  Laws. 


The  Compensation.  Differences  in  the  scales  of  compel 
sation  in  the  various  work-accident  compensation  laws  need  hei 
be  noted  only  so  far  as  to  point  out  where  they  are  so  materi 
as  to  cause  material  differences  in  the  cost  of  insurance. 

Generally  the  cash  compensation  prescribed  is  so  measun 
that  the- proportion  thereof  payable  by  employers  approximate 
on  the  average  50^  of  the  estimated  wage  losses  resulting  fro: 
the  injuries  compensated  for.  The  greatest  variations  from  th 
rule  are  to  be  found  in  the  law  of  The  Netherlands  where  tl 
percentage  is  70,  in  that  of  Finland  where  it  is  60,  in  that  < 
Russia  where,  for  permanent  disability,  it  is  66  2-3,  and  in  th; 
of  France  where,  for  permanent  disability,  it  is  60.*  Whe: 
in  the  laws  of  other  countries  the  rate  of  accident  compensatic 
exceeds  50^  of  the  wage  loss  the  excess  is  generally  offset  I 
exceptionally  long  waiting  periods,  by  contributions  from  tl 
workmen  or  by  exceptionally  low  maximum  limitations. 

In  Greece  the  compensation  is  50$;  but  half  of  its  cos 
after  the  first  three  months,  is  imposed  upon  the  Miners'  Pro^ 
dent  Fund,  to  which  workmen's  mutual  aid  societies  contribui 

In  Sweden  and  New  South  Wales  the  compensation  is  not 
all  in  proportion  to  the  wage  loss,  but  is  limited  to  provide 
minimum  relief  just  sufficient  to  prevent  destitution.  For  di 
tinction  this  kind  of  quasi-compensation  may  be  called  "  po 
relief  ".  It  is  of  course  much  cheaper  than  "  compensation 
In  Sweden  this  compensation  is  paid  wholly  by  employers.  '. 

*  In  Norway  the  rate  is  60%,  but  the  first  four  weeks  are  cornpt 
sated  by  sickness  insurance,  if  any.  If  there  be  no  sickness  insuran 
compensation  for  the  first  four  weeks  is  paid  by  the  employer  directly  a 
not  by  the  accident  insurance  fund. 

3 

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New  South  Wales  its  cost  is  divided  equally  between  the  work- 
men on  the  one  hand  and  their  employers  and  the  state  on  the 
other  hand. 

In  Great  Britain  employers  are  liable  for  compensation  for 
certain  occupational  diseases  due  to  the  employment;  and  the 
published  insurance  rates  are  for  insurance  covering  this  lia- 
bility, Under  all  the  other  compensation  laws  diseases  are  not 
injuries  for  which  accident  compensation  is  payable.  (But  in 
many  countries  they  are  covered  by  sickness  insurance  schemes)  . 

In  France,  where  an  injury  is  determined  to  have  been  due 
to  the  inexcusable  fault  of  the.  employer,  the  amount  of  the  com- 
pensation is  materially  increased.  This  extra  liability  (which 
in  practice  is  almost  a  negligible  quantity)  is  covered  by  the 
usual  form  of  insurance.  Somewhat  similar  provisions  are  to 
be  found  in  some  of  the  other  laws  ;  but  generally  they  are  penal, 
and  the  liability  therefor  is  not  covered  by  insurance.  In  Great 
Britain  the  employer  remains  subject  to  a  liability  for  full 
damages  at  Common  Law  and  for  limited  damages  under  certain 
employer's  liability  statutes  in  addition  to  his  liability  under 
the  compensation  law  ;  and  the  published  insurance  rates  are 
for  insurance  covering  all  these  liabilities.  And  a  similar 
liability  for  negligence  is  retained  in  Denmark  and  Sweden. 

Under  the  laws  of  the  following  countries  there  is  payable 
as  compensation  for  injuries  —  in  addition  to  the  cash  benefits 
—  the  cost  of  medical  and  surgical  treatment  during  the  follow- 
ing periods  :  — 

"  First  aid  "—  Italy. 
During  first  6  months  —  Belgium. 
After  first  4  weeks  —  Norway. 
"  10       "        -Hungary. 

"        "13       "        —  Germany  and  Luxemburg, 
Whenever    necessary    in   consequence   of    the    injury  — 

France,  The  Netherlands,  Russia,  Spain  and  Greece. 


In  Germany,  Austria,   Hungary  and  Luxemburg 
—  and  since  1911  in  Norway  —  compulsory  sickness  insurance 


provides  medical  and  surgical  care  during  the  first  few  weeks 
after  injury.  In  Great  Britain  and  its  colonies  it  is  presumed 
that  the  employer  or  his  insurer  will  be  induced  by  his  self  in- 
terest to  furnish  such  medical  and  surgical  care  and  treatment 
as  may  be  truly  necessary. 

In  some  countries  the  cost  of  this  item  is  a  very  large  part 
of  the  total  cost  of  compensation. 

The  Liability.  The  individual  employer  is  directly  liable 
for  compensation; — no  obligation  or  inducement  to  insure; — 
liability  not  dischargeable  by  insurance.  But,  upon  conditions 
and  by  agreement  with  his  workmen,  the  employer  may  sub- 
stitute a  scheme  of  mutual  benefit  insurance  in  place  of  his  legal 
liability. 

Great  Britain  and  the  following  of  its  colonies :  Alberta, 
British  Columbia,  Cape  of  Good  Hope,  New  Zealand, 
Quebec,  Queensland,  South  Australia,  Transvaal,  and 
Western  Australia. 

The  individual  employer  directly  liable  for  compensation ; — 
liability    dischargeable    by    insurance ; —  insurance    optional. 
Eussia,1  Spain,  and  Denmark.2 

The  individual  employer  directly  liable  for  "  poor-relief  " ; 

—  liability  dischargeable  by  insurance  if  in  the  state  insurance 
office ; —  insurance  optional,  but  security  for  accrued  liabilities 
may  be  required. 

Sweden. 

The  individual  employer  directly  liable  for  compensation; 

—  liability  dischargeable  by  insurance ;  —  insurance  optional ; 
but    all    employers     (France)     or    all    uninsured    employers 
(Belgium)    are  taxed  to  maintain  a  state  fund  to  guarantee 
the  payment  of  compensation  for  death  or  permanent  disability 
(France)  or  for  temporary  disability  (Belgium). 

France3  and  Belgium.4 

1  Insurance  of  certain  miners  compulsory. 

2  Insurance  of  seamen  compulsory. 
8  Insurance  of  seamen  compulsory. 

*  Insurance  of  miners  compulsory. 


The  state,  through  the  Royal  Insurance  Bank,  directly  liable 
for  compensation ; —  the  individual  employer  being  liable  to 
the  said  bank  for  the  compensation  to  his  employees  and  for 
his  share  of  its  expenses  of  administration; —  the  employer's 
individual  liability  for  compensation  dischargeable  by  insurance 
if  in  the  Royal  Insurance  Bank ; —  insurance  or  security  com- 
pulsory. 

The  Netherlands. 

The  individual  employer  directly  liable  for  compensation; 
—  liability  dischargeable  by  insurance;5 — insurance  (or 
security)  compulsory. 

Italy  and  Finland. 

An  employers'  compulsory  mutual  insurance  association 
directly  liable  for  compensation;  the  employers  belonging  to 
each  association  being  collectively  liable  to  it  for  its  liabilities, 
and  the  state  undertaking  to  see  to  it  that  all  the  associations 
are  maintained  solvent  and  pay  their  liabilities.  For  the  cost  of 
compensation  the  individual  employer  is  assessed  in  proportion 
to  his  payroll  and  his  risk. 

Germany,1  Austria,2  Hungary,  and  Luxemburg. 
The  state  itself,  through   its   Insurance   Office,   liable   for 
compensation;    to   meet  the   cost  thereof  employers   taxed   in 
proportion  to  their  respective  payrolls   and   to  the  estimated 
risks  of  their  respective  industries.    - 

Norway. 

The  individual  employer  directly  liable  for  compensation 
for  the  first  three  months  disability  and  for  half  the  compensa- 
tion thereafter; —  the  remaining  compensation  (if  any)  payable 
and  all  compensation  guaranteed  by  a  state  fund  maintained 
by  assessments  levied  on  employers  and  on  workmen's  mutual 
aid  societies. 

Greece.    (Miners,  quarry  men,  etc.  only.) 

6  In  Italy  only  insurance  in  National  Accident  Association  discharges 
the  liability. 

1  In  Germany  the  employer  is  directly  liable  for  some  compensation. 

2  In  Austria  there  are  some  exceptions  to  the  general  rule  of  compul- 
sory association  insurance. 


"  Poor-relief "  payable  from  a  state  fund  maintained  by 
fixed  rates  of  assessments  levied  on  workmen  and  employers 
and  by  contributions  by  the  state. 

Xew  South  Wales.     (Miners  only.)1 

In  America  there  is  a  disposition  to  seek  by  amendment  of 
the  law  to  provide  just  and  expedient  compensation  for  injured 
workmen  without  regard  to  the  question  of  who  shall  pay  the 
cost.  But  if  compensation  is  to  be  given  to  workmen  as  a 
matter  of  legal  right  and  not  of  public  charity,  there  must  be 
a  correlative  and  equivalent  legal  liability  to  pay  the  cost;  and 
it  is^primary  importance  that  that  liability  also  should  be 
just  and  expedient.  Consequently  in  an  analysis  of  the  com- 
pensation laws  it  is  a  point  for  primary  inquiry  as  to  pach 
law  to  find  out  upon  whom  the  liability  to  pay  the  cost  of 
compensation  is  therein  imposed  and  to  decide  whether  or  not 
such  imposition  is  just  and  expedient. 

From  the  foregoing  summary  it  is  manifest  that'  in  the 
laws  of  Great  Britain  and  of  nearly  all  of  those  of  its  colonies 
that  have  compensation  laws,  of  Spain,  Russia,  Denmark, 
Sweden,  France.  Belgium,  Italy,  Finland,  and  The  Nether- 
lands the  liability  to  pay  the  compensation  for  each  injury 
is  imposed  upon  the  particular  employer  of  the  particular 
workman  injured,  or  is  so  placed  that  the  cost  of  such  com- 
pensation will  be  borne  by  him.  And  although  not  so  manifest 
and  although  the  employer's  individual  liability  is  concealed 
behind  the  legal  liability  of  an  insurance  association,  etc., 
nevertheless  (as  will  appear  from  later  analysis)  it  is  certainly 
the  purpose  of  the  laws  of  Germany,  Austria,  Hungary,  and 
Luxemburg  to  impose  upon  each  individual  employer  a  share 
of  the  total  cost  of  his  insurance  association  strictly  in  pro- 
portion not  only  to  his  payroll  but  also  to  the  actual  risks 
encountered  in  his  employment.  It  is  a  logical  inference  from 
the  foregoing  that  all  these  laws  are  based  upon  an  idea  of 
employer's  responsibility  for  causation  and  a  juridical  principle 


^Somewhat  similar  insurance   of  miners  is   compulsory   in   Belgium; 
and  like  schemes  formerly  existed  in  Wiirternberg  and  Baden. 


8 

that  it  is  just  that  each  particular  employer  should  indemnify 
or  hear  the  cost  of  indemnifying  his  injured  workmen  to  the 
extent  required  of  him  by  the  law,*  that  the  fundamental  pur- 
pose of  all  these  laws  is  to  enforce  that  principle,  and  that  insur- 
ance where  incorporated  in  or  made  obligatory  by  any  of  these 
laws  is  not  an  intrinsic  factor,  but  rather  an  ancillary  method 
of  effectuating  that  fundamental  purpose.  And  while  it  is 
entirely  consistent  with  that  purpose  for  the  state  to  contribute 
and  to  require  workmen  to  contribute  towards  the  cost  of  insur- 
ance or  to  require  workmen  to  contribute  so  as  to  increase  the 
amount  of  the  indemnity,  yet  it  is  entirely  inconsistent  with  that 
purpose  to  compel  the  use  of  methods  of  security  or  insurance 
which  will  shift  the  cost  of  the  compensation  liability  or  any 
part  of  it  upon  the  state  or  taxpayers  generally  or  which  will 
distribute  it  among  employers  arbitrarily  and  not  as  above 
stated. 

The  law  of  New  South  Wales,  on  the  other  hand,  is  not 
based  upon  any  idea  of  employer's  responsibility.  The  workmen 
are  required  to  pay  half  the  cost  of  insuring  themselves,  the 
employers  are  required  to  contribute  one  quarter  thereof  and 
the  state  contributes  the  remaining  quarter.  The  purpose  here 
is  to  prevent  the  social  evil  of  pauperism  from  work-injuries  by 
assuring  a  certain  measure  of  poor-relief  at  distributed  expense, 
and  not  to  enforce  a  responsibility  of  the  employer. 

The  law  of  Greece  is  a  composite  of  these  two  different 
principles. 

The  law  of  Norway  belongs  in  principle  to  the  first  class; 
but  it  fails  to  distribute  the  cost  according  to  its  purpose. 


*  This  is  contrary  to  the  idea  that  relief  of  work  injuries  is  a  "  duty 
of  general  society ;  "  ( see  Emery,  "  Workmen's  Compensation,"  Annual 
Bulletin  of  Comparative  Law  Bureau  of  American  Bar  Association,  July 
1,  1911).  It  is  not  meant  to  be  denied  that  in  some  respects  many  of  the 
Continental  laws  fall  within  the  domain  of  what  is  there  termed  "  public  " 
as  distinguished  from  "  private  "  law ;  but  it  is  contended  that  under  all 
these  laws  the  liability  of  the  employer  and  the  right  of  the  injured  work- 
man are,  according  to  the  terminology  of  English  and  American  law,  dis- 
tinctly "  private." 


1.  In  this  connection  it  should  be  noted  that  the  legal 
liability  for  compensation  is  itself  insurance,  for  it  is  a 
quasi-contract  (i.  e.  a  contract  imputed  or  imposed  by  law) 
on  the  part  of  an  employer,  association,  etc.  to  indemnify  his  or 
its  workmen  for  their  losses  in  certain  amounts  and  upon  certain 
contingencies.  Wherever  this  basic  liability  subsists  all  other 
or  further  insurance  is  in  the  nature  of  reinsurance. 

NOTE  2.  The  term  "  social  insurance,"  now  in  frequent 
use,  is  of  too  loose  and  indefinite  a  significance  to  serve  as  a 
differential  term  by  which  to  distinguish  any  particular  class 
of  compensation  insurance.  In  one  sense  all  the  compensation 
laws  constitute  social  insurance  —  even  the  laws  of  Great 
Britain,  Russia,  Spain,  and  Denmark,  because  they  make  the 
employer  liable  as  an  insurer  to  his  injured  workmen.  In  other 
senses  only  those  compensation  laws  which  provide  technical 
insurance  or  insurance  more  or  less  at  joint  or  public  expense 
may  be  termed  social  insurance  laws.  But  how  far  the  state 
must  go  in  the  way  of  requiring,  supervising,  providing,  or  pay- 
ing the  cost  of  insurance  before  it  should  be  termed  "  social " 
is  a  question  of  terminology  that  is  wholly  unsettled. 

NOTE  3.  It  will  be  seen  from  the  foregoing  that  —  con- 
trary to  an  impression  common  in  America  —  there  is  no  general 
"  Continental  system  of  social  insurance  "  for  work-injuries  in 
contradistinction  to  the  British  system  of  direct  liability  for 
compensation,  and  that,  so  far  from  being  exceptional,  the 
British  system  is  merely  the  simplest  form  of  the  majority  type. 

Security.  In  New  South  Wales,  there  being  no  underlying 
employer's  liability  and  no  state  guarantee,  the  only  security 
for  the  payment  of  compensation  is  the  fund  itself;  and  con- 
sequently the  payment  and  the  amount  of  the  compensation 
are  dependent  upon  the  continuance  and  sufficiency  of  the  fund. 

In  Greece  the  employer's  liability  for  part  of  the  compensa- 
tion is  secured  by  the  insurance  fund ;  but  for  the  remainder  of 
the  compensation,  for  which  the  fund  is  primarily  liable, 
there  is  technically  speaking  no  security. 

•In  Norway  the  state  itself  has  assumed  the  liability  to 
pay  all  compensation  through  its  General  Insurance  Office, 


10 

so  that  all  the  resources  of  the  state  are  security  for  the 
payment. 

In  The  Netherlands  the  state  has  implicitly  assumed  the 
liability  to  pay  all  compensation  through  the  Royal  Insurance 
Bank;  and  it  secures  itself  against  loss  by  requiring  security 
from  private  insurance  companies  and  uninsured  employers, 
and  by  compelling  all  employers  either  to  insure  in  said  bank 
or  in  approved  private  insurance  companies,  or  to  furnish 
security. 

In  Germany,  Austria,  Hungary,  and  Luxemburg  the 
liabilities  of  each  insurance  association  are  secured  by  the 
collective  (joint  and  several)  liability  of  its  members. 

In  Italy  it  is  compulsory  for  the  employer  to  insure  the 
payment  of  compensation  either  in  the  National  Industrial 
Accident  Insurance  Association  (a  co-operative  association  of 
savings  banks  under  strict  state  supervision),  in  private  com- 
panies, in  mutual  associations,  or  in  establishment  funds  j1  and, 
moreover,  the  state  maintains  a  guarantee  fund. 

In  Finland2  it  is  compulsory  for  the  employer  to  insure  in 
a  private  or  mutual  company  or  association,  or  to  furnish 
guarantees. 

In  Belgium3  the  State  taxes  uninsured  employers  for  a 
fund  to  guarantee  the  payment  of  compensation  for  temporary 
disabilities. 

In  France4  the  State  taxes  all  employers  for  a  fund  to 
guarantee  the  payment  of  pensions  for  death  and  permanent 
disablement,  while  compensation  for  temporary  injuries  is 
secured  by  a  preferred  claim  on  the  assets  of  the  employer. 

In  Great  Britain,  Russia,  Sweden,  Denmark,  and  the 
British  Colonies  the  injured  workman  is  given  a  preferred 
claim  upon  the  assets  of  his  employer.  And  in  Great  Britain 


xBut  the  government  is  authorized  to  establish  compulsory  insurance 
societies  in  particular  cases. 

2  Special  provisions  for  seamen. 

3  Special  provisions  for  miners. 

4  Special  provisions  for  seamen. 


11 

he  is  in  effect  subrogated  to  the  rights  of  the  employer  in  and 
to  any  employer's  liability  insurance  that  the  latter  may  hold. 
Many    of    the    laws    contain    provisions    requiring    special 
security  for  accrued  liabilities,  as  follows : 

In  Belgium  employers  are  required  to  deposit  in  the 
National  Retirement  Fund  the  capitalized  values  of  pensions 
for  which  they  have  become  liable. 

In  Finland  uninsured  employers  must  deposit  in  an  in- 
surance company  the  capitalized  values  of  pensions  for  which 
they  have  become  liable. 

In  Sweden  uninsured  employers  may  be  required  either 
to  deposit  security  with  the  state  insurance  office  or  to  buy 
annuities  therein  to  secure  the  payment  of  pensions  for  which 
they  have  become  liable. 

In  Russia  employers  retiring  from  business  must  furnish 
security  for  the  payment  of  pensions  for  which  they  are  liable. 

In  The  Netherlands  private  insurance  companies  and  em- 
ployers who  have  given  guarantees  in  lieu  of  insuring  must 
make  deposits  with  the  Royal  Insurance  Bank  to  cover  indem- 
nities currently  falling  due  and  the  capitalized  values  of 
pensions  for  wrhich  liable. 

Purposes  Of  Compensation  Insurance.  Insurance  of  com- 
pensation is  required  or  resorted  to  for  the  following  pur- 
poses : — 

(1)  In  the  form  of  a  system,  to  collect  from  various  con- 
tributors (voluntary  or  otherwise)  a  fund  out  of  which  to 
pay  the  compensation. 

Examples  of  compulsory  systems  with  this  purpose :  — 
Xew  South  Wales,  Greece,  Austria,  Germany,  and 
Xorway. 

Under  the  laws  of  Great  Britain,*  of  nearly  all  its  Col- 
onies and  of  Sweden  it  is  permissible  for  an  employer, 
under  conditions  and  by  agreement  with  his  workmen, 
to  substitute  a  voluntary  system  of  mutual  benefit, 
insurance  in  place  of  his  legal  liability. 

*  See  Act  of  Dec.  21,  1906,  Sec.  3. 


12 

(2)  In  the  form  of  a  system,  to  collect  a  fund  to  guarantee 
payment  by  the  parties  liable. 

Examples:   France,   Belgium,   and   Italy. 

(3)  In  the  form  of  a  contract,  to  secure  payment  to  the 
injured  workmen  and  to  indemnify  the  employer. 

This  is  the  form  of  the  contract  or  "  policy "  of  in- 
surance in  private  companies  or  associations  which  prevails 
in  Europe.  It  corresponds  to  our  "  collective  insurance." 

(4)  In  the  form  of  a  contract,  solely  to  indemnify  the 
employer. 

This  is  the  prevailing  form  of  contract  or  policy  in 
America,  and  is  commonly  termed  "  employers'  liability  " 
insurance.  Where  abroad  insurance  of  compensation  is 
compulsory  this  form  of  policy  is  not  permitted ;  and  where 
abroad  insurance  serves  to  discharge  the  employers'  liability 
for  compensation  it  is  not  valid  for  that  purpose. 

It  is  now  generally  recognized,  that  the  fourth  form  of 
insurance,  while  a  necessary  concomittant  of  the  discarded 
liability  laws,  is  socially  harmful,  because  it  insures  only  employ- 
ers against  their  employees  instead  of  operating  directly  for  the 
benefit  of  the  latter  in  proper  cases.  But  it  is  a  mistake  to 
believe  that  any  of  the  other  forms  of  insurance  is  in  all 
cases  socially  beneficial.  Where  needed,  as  is  generally  the 
case,  either  to  secure  the  workmen  or  to  distribute  the  em- 
ployer's risks  insurance  is  of  great  benefit.  But  where  not 
needed  for  either  of  these  purposes, —  where,  as  is  sometimes 
the  case,  the  employer  is  directly  liable  and  is  responsible  and 
able  to  defray  his  compensation  charges  without  embarrassment 
—  insurance  is  wasteful.  And  it  is  always  industrially  harm- 
ful to  the  limited  extent  that  it  disturbs  the  direct  relations 
between  employer  and  employed  —  whether  it  be  in  a  stock 
company,  in  a  mutual  association  or  in  a  state  office  or  scheme. 
Of  these  three  forms  of  insurance,  the  last  —  in  my  opinion, — 
by  reason  of  the  political  element,  is  by  far  the  most  disturbing. 


13 

State  insurance  has  for  a  purpose  to  keep  down  insurance 
.rates;  (see  "State  Insurance  in  Competition  with  Private 
Insurance  "). 

Compulsory  state-insurance  and  compulsory  mutual  in- 
surance have  for  a  purpose  not  only  to  secure  the  workmen 
but  also  to  provide  insurance  cheaply  for  the  benefit  of  em- 
ployers (see  "  Cost  of  Insurance ").  In  this  connection  it 
should  be  borne  in  mind  that  it  is  harmful  to  provide  insurance 
for  hazardous  establishments  too  cheaply  —  i.  e.  below  cost  — 
for  that  amounts  to  subsidizing  the  maintenance  of  hazardous 
methods  and  conditions  of  industry.  It  is  an  established  doctrine 
that  unduly  to  cheapen  rates  for  fire  insurance  tends  to  increase 
the  fire  risk.  That  doctrine  applies  also  and  with  equal  force  to 
accident  compensation  insurance. 

State  Insurance.  State-insurance  is  insurance  by  the  state 
itself  in  or  through  a  fund  or  office  maintained  by  it  and 
managed  by  its  officials. 

In  Norway  state-insurance  is  compulsory, —  that  is,  it  is 
compulsory  to  insure  in  the  state  insurance  office,  which  has  a 
legal  monopoly  of  this  branch  of  the  insurance,  business. 

In  Italy*  and  The  Netherlands  insurance  (or  security) 
is  compulsory  and  there  is  state-insurance;  but  it  is  not  com- 
pulsory to  insure  in  the  state's  insurance  office, —  other  alterna- 
tive forms  of  insurance  (or  security)  being  also  permitted. 

In  New  Zealand  insurance  is  purely  voluntary;  but  the 
state  itself  sells  accident  compensation  insurance  (as  well  as 
fire  and  life  insurance)  in  competition  with  private  companies. 

In  Sweden  insurance  is  optional  but  the  state  sells  accident 
compensation  insurance. 

In  France  and  Belgium  the  state  provides  guarantee  in- 
surance. In  France  the  National  Accident  Insurance  Fund 
also  sells  insurance  of  compensation  for  permanent  disability 
or  death.  In  Belgium  the  law  provides  that  the  National 

*  The  National  Insurance  Fund  of  Italy  is  not  strictly  a  state  institu- 
tion, but  is  a  voluntary  mutual  association  of  savings  banks  under  close 
government  supervision,  not  operated  for  profit,  and  favored  by  free  Post 
Office  facilities,  remission  of  taxes,  etc.,  etc. 


14 

Retirement  Fund  shall  (or  may?)   sell  accident  compensation 
insurance;  but  that  provision  has  not  been  carried  out. 

NOTE  1.  In  France  and  Finland  there  is  compulsory 
state-insurance  of  seamen. 

NOTE  2.  "  State-insurance  "  must  not  be  confused  with 
"  compulsory  insurance".  Compulsory  insurance  is  such  in- 
surance as  is  required  by  law,  whether  it  be  state  or  private 
insurance.  For  illustrations:  There  is  compulsory  insurance 
in  Germany,  Hungary,  Austria,  and  Luxemburg,  but  it  is  not 
state-insurance;  and  there  is  state-insurance  in  Sweden,  but 
it  is  not  compulsory  insurance. 

NOTE  3.  State  regulation  or  supervision  of  insurance  and 
of  insurance  companies  and  associations  also  must  be  dis- 
tinguished from  state-insurance.  In  New  York,  for  example, 
insurance  is  subject  to  many  regulations ;  but  those  regulations 
neither  partake  of  the  nature  of  state-insurance  nor  tend  towards 
it. 

NOTE  4.  The  state  insurance  offices  of  France,  Belgium, 
Sweden,  The  Netherlands,  and  Denmark  also  sell  annuities  to 
cover  pension  payments,  upon  purchasing  which  annuities  em- 
ployers are  discharged  from  the  liability  for  the  pensions. 

State  Fund  Insurance.  This  kind  of  insurance  is  insurance 
which  is  provided  by  a  fund  maintained  by  taxes  or  assessments 
levied  by  the  state.  It  is  distinguished  from  pure  state-insur- 
ance by  the  fact  that  although  the  state  manages  the  fund 
it  does  not  itself  assume  the  liability  to  pay  the  compensation 
or  guarantee  its  payment,  and  consequently  that  the  payment  and 
amount  of  the  compensation  is  dependent  upon  the  continuance 
and  sufficiency  of  the  fund. 

The  law  of  New  South  Wales  provides  for  insurance  in  this 
form;  and,  so  in  part,  does  the  law  of  Greece,  Under  the 
law  of  New  South  Wales  the  contributions  are  fixed  and  con- 
sequently the  rate  of  compensation  cannot  be;  and  therefore 
the  law  provides  that  the  Governor  shall  revise  the  scale  of  com- 
pensation to  correspond  with  the  financial  condition  of  the  fund. 
Under  the  law  of  Greece,  vice  versa,  the  rates  of  compensation 


15 

are  fixed  and  consequently  the  assessments  and  contributions 
cannot  be;  and  therefore  the  law  provides  that  the  insurance 
officials  shall  vary  the  assessments  and  contributions  to  be  levied 
as  may  be  necessary  to  maintain  the  sufficiency  of  the  fund. 

Mutual  and  Establishment  Fund  Insurance.  The  follow- 
ing forms  of  mutual  and  of  establishment  fund  insurance  are 
contemplated  or  permitted  under  the  various  compensation 
laws. 

(1)  Where  a  group  of  employers  join  in  an  association  to 
insure  the  payment  of  their  joint  liabilities  for  compensation. 

(2)  Where  a  group  of  employers  and  their  workmen  join 
in  contributions  to  a  fund  to  insure  compensation. 

(3)  Where  a  group  of  employers  and  their  workmen  join 
in  contributions  to  a  fund  to  insure  the  payment  of  compensation 
and  of  other  and  additional  benefits  equivalent  to  the  workmen's 
contributions. 

(4)  Where  a  single  employer  and  his  workmen  join  in 
contributions  to  a  fund  for  the  purposes  specified  in  (3),  supra. 

(5)  Where  an  employer  alone  maintains  a  fund  to  insure 
compensation  (or  something  more)  to  his  workmen. 

In  Germany,  Hungary,  and  Luxemburg  form  (1)  is  com- 
pulsory. (It  is,  however,  in  effect  form  (2),  because  com- 
pensation for  the  first  weeks  is  provided  by  sickness  insur- 
ance funds,  to  which  the  workmen  contribute.) 

In  Austria  form  (2)  is  compulsory. 

In  Italy  forms  (1)  and  (5)  are  permitted,  but  do  not 
discharge  the  employer's  liability. 

In  The  Netherlands  form  (1)  is  permitted,  but  does 
not  discharge  the  employer's  liability. 

In  Finland,  form  (1)  is  permitted,  and  discharges  the 
employer's  liability. 

In  France  forms  (1)  and  (3)  and  establishment  funds 
along  the  lines  of  forms  (4)  and  (5)  are  permitted,  and 
discharge  the  employer's  liability. 

In  Belgium  forms  (4)  and  (5)  are  permitted  and  dis- 
charge the  employers'  liability.  Form  (3)  and  presump- 


16 

tively  also  form  (1)  are  also  permitted,  but  discharge  the 
employer's  liability  for  temporary  disabilities  only. 

In  Russia  forms  (1)  and  (3)  are  permitted,  and  dis- 
charge the  employer's  liability. 

In  Denmark  form  (1)  is  permitted,  and  discharges  the 
employer's  liability. 

In  Sweden,  insurance  being  voluntary,  almost  any  kind 
of  insurance  is  tolerated,  but  nothing  except  insurance  in 
the  state  office  discharges  the  employer's  liability.  The  law, 
however,  permits  employers  and  employees  by  agreement  to 
substitute  other  arrangements,  provided  they  are  equally 
favorable  to  the  workmen,  in  place  of  the  legal  liability. 
CNo  information  as  to  the  operations  of  this  provision  is 
available.) 

In  Great  Britain  and  its  colonies  (^"ew  South  Wales 
excepted)  all  forms  of  insurance  are  permitted;  but  they 
do  not  discharge  the  employer's  liability.  The  law  how- 
ever permits  employers  and  employees  by  agreement  to 
substitute  other  schemes  of  benefit  or  insurance  in  place 
of  the  legal  liability,  provided  they  are  equally  favorable 
to  the  workmen.  Under  this  provision  form  (4)  has  had 
some  success. 

In  all  the  countries  mentioned,  except  Great  Britain,  its 
colonies  and  Sweden,  insurance  in  whatever  form  and  of  what- 
ever effect,  and  in  Great  Britain,  its  colonies  (Xew  South 
Wales  excepted)  and  Sweden,  insurance  under  the  substituted 
schemes  there  permitted,  is  minutely  regulated  by  law  or  official 
orders  as  to  reserves,  etc.,  etc.,  and  is  subjected  to  strict  gov- 
ernmental supervision.  And  in  some  of  those  countries  particu- 
lar insurance  associations  or  particular  forms  of  insurance  are 
especially  favored  by  law  in  ways  too  various  and  complex  to  be 
detailed. 

StOCk  Company  Insurance.  This  kind  of  insurance  is  in 
private  companies  which  sell  insurance  for  profit,  the  policy 
holders  neither  sharing  in  the  profit,  if  there  be  a  profit,  nor 


17 

being  subject  to  assessment  to  make  good  the  loss,  if  there  be 
a  loss. 

Insurance  in  stock  companies  is  permissible  in  Great 
Britain,  Sweden,  and  the  British  Colonies  (New  South  Wales 
excepted),  but  it  does  not  discharge  the  employer's  individual 
liability.  In  France,  Denmark,  Russia  and  Spain,  if  in  an 
approved  company,  it  discharges  the  employer's  liability.  In 
Belgium,  if  in  a  Belgian  company,  it  discharges  the  liability; 
but  if  in  a  foreign  company,  although  authorized  to  do  business 
in  Belgium,  it  does  not.  And  in  Italy,  the  Netherlands  and 
Finland,  where  insurance  or  security  is  compulsory,  insurance 
in  approved  stock  companies  is  an  optional  form  of  compliance 
with  the  law  —  but  in  the  two  former  countries  it  does  not 
discharge  the  employer's  liability. 

Guarantee  Insurance.  Three  countries  maintain  funds  to 
guarantee  the  payment  of  compensation  by  the  employers  liable 
or  their  insurers,  namely :  Italy,  France,  and  Belgium. 

In  Italy  the  fund  is  under  the  supervision  of  the 
Government  Bank  of  Deposit  and  Loans  and  is  supported 
by  fines  for  non-compliance  with  the  requirement  to  insure 
and  by  other  fines  and  by  collecting  compensation  for  fatal 
injuries  where  there  are  no  dependents.  (No  information 
is  available  to  the  writer  as  to  the  condition  and  operations 
of  this  fund. ) 

In  France  the  guarantee  fund  is  managed  by  the  National 
Old  Age  Retirement  Fund  and  is  supported  by  taxes,  in 
the  nature  of  occupational  license  fees,  upon  all  employers 
covered  by  the  law.  But  it  guarantees  pension  payments 
for  death  or  permanent  disability  only,  and  leaves  the 
compensation  for  temporary  disability  to  be  secured  by  a 
preferred  claim  on  the  assets  of  the  employer.  The  tax  is 
not  heavy  (in  1906  it  aggregated  1,859,053  francs  on  an 
aggregate  payroll  of  3,615,000,000  francs),  and  yet  it  is 
sufficient  (in  1906  the  expenditures  of  the  fund  were 
743,988  francs).  But  it  is  to  be  observed  that  by  omitting 


18 

temporary  injuries  it  avoids  about  one-third  of  the  burden 
of  a  complete  guarantee. 

In  Belgium  the  guarantee  fund  is  managed  by  the 
National  Retirement  Fund  and  is  supported  by  a  tax  on 
those  employers  only  who  do  not  carry  insurance.  The 
fund  guarantees  compensation  for  temporary  disability 
only ; —  uninsured  employers  upon  becoming  liable  for 
pensions  for  death  or  permanent  disability  being  required 
to  deposit  the  capitalized  values  thereof  (or  security  there- 
for) with  the  National  Retirement  Fund. 

Premiums.  "  Level  premium  "  insurance  is  that  which  is 
sold  or  provided  for  a  definite  premium,  payable  in  advance,  as 
the  full  price  for  the  assumption  of  risk  for  a  definite  period. 

Such  premiums  are  charged  for  insurance  by  "  stock 
companies  "  generally,  and  by  the  state-insurance  offices  of 
Norway,  The  Netherlands,  Italy,  France,  Sweden  and  New 
Zealand. 

"  Assessment  insurance  "  is  provided  by  funds  maintained 
by  assessments  levied  upon  the  insured.  Such  assessments 
may  take  the  form  of  more  or  less  regular  and  definite 
premiums;  but,  in  addition  to  such  regular  payments,  the 
assured  remain  liable  for  such  further  assessments  as  may  be 
necessary  to  supply  any  deficiencies  in  the  funds. 

Private  mutual  insurance  companies  and  associations 
generally  maintain  their  funds  in  this  way;  and  so  do  the 
compulsory  employers'  associations  of  Germany,  Hungary, 
Austria,  and  Luxemburg.  And  the  state  fund  of  Greece 
is  maintained  in  like  manner  (but  by  assessments  upon 
both  employers  and  workmen's  societies). 

Rates.  It  is  a  postulate  of  the  advocates  of  compulsory 
mutual  or  state  insurance  that  insurance  for  profit  is  a  social 
evil.  That  postulate  is  a  quasi-socialistic  assumption.  The 
greatest  desideratum  of  insurance  (next  to  soundness)  is  that 
the  rates  charged  shall  be  fair ; —  and  to  be  fair  accident  rates 


19 

should  be  in  proportion  to  the  risks.  And  especially  is  it  im- 
portant that  the  rates  for  particular  employers  among  com- 
petitors in  the  same  industry  should  be  differentiated  according 
to  risks,  for  otherwise  all  material  incentive  to  efficiency  in 
accident  prevention  on  the  part  of  the  individual  employer  will 
be  removed. 

"Where  insurance  is  voluntary  or  where  private  insurance  or 
security  is  permitted,  competition  among  insurers  tends  to  pro- 
duce a  fair  differentiation  of  rates,  and  the  alternative  of 
standing  out  or  of  furnishing  security  enables  employers  to 
bargain  freely  for  fair  rates.  But  where  state  officials  fix  the 
rates  for  all  or  where  the  state  compels  mutual  insurance  in 
one  specified  mode,  the  state  must  see  to  it  that  the  rates  are 
fair,  otherwise  its  scheme  of  insurance  may  become  a  serious 
social  evil. 

In  Xorway  the  problem  of  fair  rates  is  practically  ignored. 
The  state-insurance  office's  rates  are  "  flat "  for  each  industry. 
And  although  it  is  being  attempted  gradually  to  fix  correct  rates 
for  the  different  classes  of  industry,  experience  tables  show  that 
for  a  large  proportion  of  them  the  rates  have  varied  extremely 
from  the  demonstrated  risks.  (See  Bulletin  of  Bureau  of  Labor, 
Xo.  90,  pp.  800-1.) 

In  Germany,  Austria,  Hungary  and  Luxemburg,  on  the 
contrary,  the  laws  prescribe  or  contemplate  methods  of  rate 
fixing  designed  to  result  in  approximately  fair  rates.  The 
methods  under  the  German  and  Austrian  laws  are  here  sum- 
marized for  illustration. 

In  Germany  the  liability  for  industrial*  accidents  is  carried 
by  an  association  of  all  employers  in  each  trade  or  group  of 
allied  trades  throughout  the  empire  or  in  each  of  certain  large 
territorial  divisions.  The  association  —  or  in  some  cases  a 
section  of  the  association  —  forms  a  risk-tariff  according  to 
the  degrees  of  risk  in  the  different  establishments  in  the  asso- 
ciation or  section,  assigns  each  establishment  to  a  class  in  that 
tariff,  and  grades  the  assessments  accordingly.  This  tariff  must 


*Agricultural  and  navigation  insurance  are  different. 


20 

be  revised  at  least  every  five  years  with  respect  to  the  accidents 
that  have  occurred.  Between  re-classifications  particular  estab- 
lishments may  be  transferred  from  one  class  to  another.  The 
state  makes  all  compensation  payments  through  the  Post  Office, 
and  at  the  end  of  each  year  charges  each  association  the  total 
of  all  payments  made  on  its  account  during  that  year.  There- 
upon each  association  collects  that  total  (plus  the  amount  re- 
quired for  reserves,  etc.)*  from  its  members  by  assessments 
graded  according  to  the  risk  tariff.  Each  new  classification  of 
establishments  is  made  with  respect  both  to  the  accidents  that 
have  actually  occurred  in  each  establishment  during  the  period 
covered  by  the  preceding  classification,  and  to  the  coefficient  of 
risk  under  actual  conditions  in  each  establishment  as  reported 
by  the  association's  inspectors.  Consequently  the  rate  for  each 
establishment  should  be  approximately  fair  —  that  is,  if  the 
association  be  managed  fairly. 

In  Austria  the  insurance  associations  (institutions)  are 
organized  territorially  and  include  all  establishments  in  all 
trades  covered  by  the  law  (railroads  and  mines  excepted)  within 
their  respective  territories.  They  are  governed  by  boards  of 
directors  consisting  of  one-third  employers,  one-third  workmen 
and  one-third  Government  nominees.  The  general  classes  of 
risks  are  fixed  by  the  Government,  but  the  board  of  directors  of 
each  association  assigns  each  of  its  establishments  to  a  class. 
The  employer  of  each  establishment  is  then  assessed  according 
to  the  "  coefficient  of  risk  "  of  that  class.  Elaborate  methods 
are  resorted  to  to  ascertain  the  risks  correctly  and  to  fix  the  rates 
accordingly ;  but  it  is  manifest  from  experience  that  some  extra 
hazardous  industries  have  avoided  an  adequate  rate,  and  by 
their  disproportionate  losses  have  impaired  the  reserves  of  the 
majority  of  the  associations. 

In  Great  Britain  the  rates  are  fairly  well  differentiated  by 
competition  and  bargaining,  particularly  for  the  hazardous 
industries.  The  assertion,  frequently  made,  that  rates  there 
are  "  flat,"  is  the  reverse  of  true,  as  may  be  seen  by  consulting 


*  Expenses  of  management  are  assessed  differently. 


21 

the  table  under  the  heading  "  Cost  of  Insurance,"  post,  but  as 
may  be  more  convincingly  ascertained  by  enquiry  of  those  who 
have  had  experience  with  insurance  in  England. 

Reserves.  An  accident  causing  death  or  long  continued 
disability  under  the  compensation  laws  generally  gives  rise 
to  a  liability  for  a  pension,  running  for  an  uncertain  and  some- 
times long  period  and  which  is  a  fixed  charge  on  the  insurer 
during  that  period.  There  are  two  insurance  methods  of  meet- 
ing such  charges. 

1.  The  first  method  is  to  charge  as  an  immediate  liability 
only  that  part  of  each  pension  which  is  payable  during  the 
current  year  and  to  leave  the  payments  falling  due  in  subse- 
quent years  on  all  pension  charges  to  be  met  by  the  premiums 
or  assessments  for  those  years. 

This  method  (supplemented  by  assessments  for  an 
equalization  reserve)  is  permitted  in  Germany  for  the 
majority  (but  not  all)  of  the  industrial  employers'  accident 
insurance  associations.  It  is  used  by  private  employers' 
mutual  associations  in  Sweden  —  where  such  insurance  does 
not  discharge  the  employers'  individual  liabilities.  And 
there  is  nothing  to  forbid  it  in  Great  Britain  and  its 
Colonies, —  where  insurance  is  purely  voluntary,  does  not 
discharge  the  employer's  individual  liability,  and  is  safe- 
guarded by  publicity  and  not  by  specific  governmental  regu- 
lations. 

2.  The  second  method  is  to  charge  as  an  immediate  liability 
the  estimated  capitalized  value  of  each  pension  and  to  maintain 
in    a    reserve    fund    an    amount    sufficient,    with    its    interest 
accumulations,  to  meet  all  the  future  payments  required  on  all 
such  pension  charges. 

This  method  is  prescribed  for  the  compulsory  employers' 
mutual  associations  of  Austria  and  Hungary  (as  to  Luxem- 
burg, quaere)  and  for  the  "  Engineering  and  Excavating  " 
association  and  the  "  branch  institutes  "  *  of  Germany,  is 


*  The  branch  institutes  carry  the  insurance  for  petty  employers,   in 
certain  trades. 


22 

followed  in  the  management  of  the  miners'  fund  of  Greece, 
and  in  all  the  state-insurance  offices  —  that  of  ISTorway  in- 
cluded,—  is  required  of  all  approved  private  insurance 
in  all  countries  except  Great  Britain,  its  colonies  and 
Sweden,  and  in  these  latter  countries  is  required  of 
mutual  benefit  insurance  schemes  substituted  by  agreement 
in  lieu  of  the  legal  liability  for  compensation.  (Whether 
or  not  the  reserves  are  everywhere  properly  maintained  in 
accordance  with  this  method  is,  of  course,  another  question) . 

In  ^Kew  South  Wales  neither  method  is  followed.  The 
contributions  are  fixed.  If  they  do  not  maintain  a  sufficiency  in 
the  insurance  fund  to  pay  the  pensions,  the  pensions  must  be 
reduced. 

Cost  Of  Insurance.  Who  should  pay  the  cost  of  insurance? 
Because  the  employer  alone  should  bear  the  cost  of  compensa- 
tion, it  does  not  necessarily  follow  that  he  should  also  pay  the 
cost  of  insuring  it,  unless  the  insurance  is  purely  voluntary 
and  is  taken  by  him  primarily  for  his  own  protection.  But 
where  it  is  required  by  law,  for  the  protection  of  the  workmen 
and  indirectly  of  society,  should  not  the  workmen  or  society 
pay  the  cost  or  part  of  it  ? 

That  society  should  pay  the  cost  is  the  \iew  adopted  in 
Norway  and'  Sweden,  where  the  expenses  of  management  of 
the  state  insurance  office  are  paid  by  general  taxation.  In  The 
Netherlands  the  state  contributes  half  the  salaries  of  employees 
of  the  state  insurance  office.  And  in  Xew  South  Wales 
the  state  contributes  heavily  to  the  cost  of  compensation  and 
incidentally  to  that  of  insurance.  In  the  other  insurance 
countries  generally  the  state  limits  its  contributions  to  free 
administrative  assistance  —  w^hich,  however,  is  sometimes  very 
substantial  and  expensive. 

In  l^ew  South  Wales,  Greece,  Austria,  Germany,  Hungary, 
and  Luxemburg  the  workmen  contribute  to  the  cost  of  com- 
pensation and,  incidentally,  of  insurance  —  in  new  South 
Wales  heavily,  and  in  Germany,  Hungary,  and  Luxemburg  in- 
directly through  the  sickness  insurance  funds. 


23 

What  is  the  cost  of  insurance  under  the  various  compensation 
laws  respectively  ?  This  inquiry  applies  to  all  the  compensation 
laws;  for  even  where  insurance  is  in  no  degree  compulsory  it 
is  generally  necessary  or  desired.  It  is  argued  that  the  ex- 
penses of  management  of  the  private  insurance  companies  in 
England  average  36$  of  premiums,  whereas  the.  corresponding 
expenses  of  the  Norwegian  state  office  and  of  the  German 
accident  associations  average  only  about  11$  and  16$  respect- 
ively, and,  therefore,  that  the  English  system  is  wasteful  and 
comparatively  expensive.  This  argument  begs  the  case  for  mon- 
opolistic insurance  as  against  competitive  insurance;  for  com- 
petition always  entails  greater  expenses  of  management  than 
monopoly.  But  expenses  of  management  are  only  one  factor  in 
cost,  and  we  are  concerned  not  with  one  factor  only  but  with 
the  total  cost  and  comparative  efficiency  of  insurance.  However, 
before  taking  up  that  inquiry,  it  is  worth  while  to  examine 
critically  into  the  foregoing  assertion  as  to  "  expenses  of  man- 
agement "  in  England,  Norway,  and  Germany. 

In  the  Norwegian  expenses  of  management  there  is  not 
a  cent  spent  for  accident  prevention.  In  both  the  German  and 
English  expenses  there  is  a  considerable  item  for  that  purpose. 
In  Norway  the  administrative  work  of  collecting  premiums, 
making  pension  payments,  investigating  injuries,  adjusting 
awards,  etc.,  is  performed  by  the  Post  Office  and  by  local 
officials;  and  in  Germany  injuries,  etc.,  are  investigated  by  the 
local  police,  and  pension  payments  are  made  by  the  Post  Office. 
Undoubtedly  there  is  economy  in  this  use  of  pre-existing  govern- 
mental machinery;  but  it  results  in  shifting  upon  the  govern- 
ment or  other  branches  of  the  government  a  large  portion  of 
the  expenses  of  managing  the  insurance  and  thereby  in  conceal- 
ing that  part  of  them.  Moreover  the  use  of  local  political 
machinery  for  such  purposes  gives  rise  to  abuses  which  waste 
the  funds  and  increase  the  cost,  and  yet  arithmetically  decrease 
the  ratio  of  expense.  Eeduced  expense  of  management  means 
increased  expense  of  mismanagement.  The  expenses  of  mis- 
management are  to  be  found  amon^  the  claims.  To  disregard 


24 

them  and  to  limit  attention  to  the  accredited  expenses  of  man- 
agement is  vitally  misleading.  To  go  further  into  this  item 
of  expense  of  management,  note  that  in  Germany  all  injuries 
lasting  less  than  13  weeks  (about  78$  of  reported  work-injuries) 
are  investigated  by  local  police,  etc.,  and  disposed  of  at  the 
expense  of  sickness  insurance  without  any  expense  to  the  acci- 
dent insurance  associations ;  that  in  Norway  all  injuries  lasting 
less  than  4  weeks  (about  64$  of  reported  work-injuries)  are 
similarly  disposed  of  without  any  expense  to  the  accident  insur- 
ance fund;  but  that  in  England  all  injuries  lasting  over  one 
week  are  good  claims  against  the  accident  insurers  and  require 
investigation,  so  that  probably  less  than  30$  of  work  injuries 
are  disposed  of  without  material  expense  of  management.  In 
other  words  in  England  not  only  do  the  computed  expenses 
of  management  include  this  expensive  item  of  investigation, 
which  in  Norway  and  Germany  is  shifted  onto  general  taxes  and 
ignored,  but  also  the  accident  insurance  covers  a  much  higher 
proportion  of  work-injuries.  Or  to  put  it  differently  78$  in 
Germany  and  about  64$  in  Norway  of  certain  expenses  of  man- 
agement of  the  insurance  of  compensation  for  work-injuries  falls 
upon  the  sickness  insurance  and  not  upon  the  accident  insurance 
funds.  Finally,  in  Germany  an  important  part  in  the  manage- 
ment of  the  accident  associations  is  borne  by  employers,  who  are 
drafted  for  this  service,  and  remunerated  insignificantly.  At 
first  the  employers  assumed  this  philanthropic  duty  enthusias- 
tically ;  but  now,  according  to  Herr  Friedensburg,  they  are  be- 
coming weary  of  it  and  disposed  to  hire  substitutes  if  that  were 
permitted.  This  service  costs  the  drafted  employers  time  and 
labor  the  value  of  which  should  be  but  is  not  charged  as  an 
expense  of  management.  In  short  the  11$  of  premiums  in 
Norway  and  the  16$  in  Germany  respectively  do  not  cover  the 
expenses  of  management,  but  only  that  portion  of  them  which  is 
paid  in  cash  by  the  insurance  office  or  associations.  What  is  the 
true  ratio  to  premiums  of  total  expenses  of  managing  the  insur- 
ance in  Norway  and  Germany  respectively  no  one  knows,  be- 
cause a  large  part  of  it  is  shifted  over  where  it  is  concealed. 
There  is  nothing  to  indicate  that  state  or  compulsory-mutual  in- 


25 

surance  gives  service  equivalent  to  private  insurance  at  less  rela- 
tive expense.  The  only  saving  is  in  part  of  the  commissions 
paid  to  agents ;  and  as  against  that  saving  is  the  extra  cost  of  the 
abuses  of  monopoly.  Sound,  efficient,  and  satisfactory  insur- 
ance at  the  least  cost  is  the  desideratum ;  and  there  is  nothing  to 
indicate  that  the  total  cost  of  insuring  compensation  is  relatively 
any  lower  in  Norway  or  Germany  than  in  Great  Britain. 
Behind  the  demand  for  state  insurance  on  the  part  of  many 
employers  is  not  a  belief  in  its  relative  cheapness,  but  a  desire  to 
shift  part  of  the  cost  of  compensating  for  injuries  in  their  busi- 
nesses onto  the  general  body  of  taxpayers. 

Now,  what  is  the  actual  cost  'of  insurance  in  these  three 
countries, —  which  we  will  take  as  typical  for  purposes  of  com- 
parison ?  It  would  be  desirable  also  to  take  into  the  comparison 
the  cost  in  France  and  Sweden  —  in  France  because  of  its  in- 
dustrial importance  and  in  Sweden  in  order  to  learn  the  effect 
of  competition  on  the  cost  of  insurance  in  a  subsidized  state  in- 
surance office.  But  the  only  itemized  rates  of  the  stock  com- 
panies in  France  which  I  can  find  are  old  and  were  far  below 
cost ;  and  in  Sweden  the  liability  is  for  "  poor  relief,"  which 
costs  much  less  than  the  English,  German,  or  Norwegian 
liability  for  compensation. 

The  following  comparative  table  of  insurance  rates  for 
a  few  of  the  more  important  hazardous  industries  in  Norway, 
England,  and  Germany  shows  the  approximate  cost  in  those 
countries  respectively.  It  has  been  compiled  from  the  tables 
of  Mr.  Miles  M.  Dawson,  published  in  the  Bulletin  of  the 
Bureau  of  Labor,  September,  1910  (No.  90).  The  rates  are 
given  in  percentages  of  payrolls. 

The  figures  under  "  Norway  "  are  the  flat  rates  at  which 
all  employers  in  the  given  trade-class  are  taxed.  (The  two 
figures  under  "  rolling  mills  "  cover  four  classes  with  a  special 
rate  for  each.) 

The  figures  under  "  England "  are  the  maximum  and 
minimum  premium-rate  published  by  either  the  tariff  or  non- 
tariff  companies.  These  published  , rates  are  not  only  well 


26 

differentiated,  but  in  practice  some  bad  risks  are  refused  even 
at  maximum  rates  and  some  good  risks  accepted  in  special 
classifications  below  minimum  rates.  In  the  industries  for 
which  no  rates  are  given  a  special  rate  is  fixed  for  each  case, 
depending  upon  the  particular  risk. 

The  figures  under  "  Germany  "  are  the  average  assessment- 
rates  in  each  given  industry  for  the  year  1908  —  there  being  con- 
siderable differentiation  for  different  establishments  in  each 
association  or  section.  (Where  two  figures  are  given  for  one 
trade  there  are  several  classes  in  the  trade  with  a  different  rate 
for  each.)  ~Note  that  the  German  rates  do  not  cover  the 
expenses  of  management  of  the  insurance  associations,  which 
are  assessed  separately,  nor  generally  the  employers'  direct 
liability  for  16  2-3$  accident  compensation  between  the  fifth  and 
fourteenth  weeks  after  injury ;  (for  particulars  of  this  additional 
liability  see  the  German  Workmen's  Insurance  Code  of  July  19, 
1911,  Arts.  573-7;  Bulletin  of  the  Bureau  of  Labor,  No.  96.) 


Norway  England  Germany 

Boiler  construction     .       .       .  2.31  1.25-2.00  3.80 

Brewery  and  malt  works  .       .  1.43  .75-.S75     1.S6-3.30 

Carpentry  —  general  contract- 
ing      2.18  .75-2.50  2.32 

Carriage  factories       .       .       .  1.54  -2.50  .84 

Casting  works  —  Iron       .       .  1.47  .625-3.00  1.42 

"           "         -Steel    .       .  1.47  .625-3.00  2.03 

R.  R.   Construction  —  exclud- 
ing tunneling        .       .       .  3.01              2.30 

Drayage,    rigging    and    heavy 

and  heavy  moving       .       .  ....  1.00  4.94 

Electrical  —  machinery  plants  1.22  ....  .98 

—  installing    lights, 

etc .94  .50-1.50  1.10 

Furnaces  —  blast  1.47  .625-2.50     1.42-3.25 


27 


Laundries  —  power    . 
Locomotive  works 

Norway 

.73* 
1.36 

England 

1.00 
.875-1.50 

Germany 

1.17 
1.69 

Machine   and  repair  shops  — 

1.36 

.75-2.00 

1.69 

Painters  —  exterior   . 

1.41 

1.     -3.00 

1.01 

Powder  factories  —  black 
Rollin0*  mills       .... 

2.88*. 
.95-1.92* 

.625-2.50 

4.04 
1.42-3.25 

Sawmills        ..... 

1.99 

1.25-2.50  ' 

4.19 

Stonecutting  on  buildings 
Tanneries      ..... 

2.40 
.76 

2.50 

.75 

1.51 

8.23 

Tool  makers         .... 

.80 

.75-2.00 

1.62 

Turning  factories  —  iron 
"               "            -wood 

1.47 
1.44 

.625-2.50 

.84 
1.50 

Wood  pulp  factories  . 

1.57 

1.25 

2.55 

The  comparison  is  not  exact  for  three  reasons  :  (1)  Because 
the  scales  of  compensation  differ.  But  the  comparison  is  more 
than  fair  to  Norway  and  Germany,  for  their  scales  of  compen- 
sation for  injuries  only,  beginning  from  the  end  of  the  fourth 
and  thirteenth  week  respectively,  cost  less  respectively  than  the 
English  scale  of  compensation  for  both  injuries  and  trade- 
diseases,  beginning  sometimes  from  the  date  of  injury  and 
sometimes  from  the  end  of  the  first  week.  (2)  The  rates  for 
Germany  do  not  represent  the  cost  of  insuring  compensation  dur- 
ing the  current  year,  but  rather  that  proportion  of  the  cost  of 
maintaining  the  insurance  scheme  which  happened  to  be  assess- 
able that  year.  But  the  comparison  is  not  unfair  to  Germany-, 
for  certainly  the  rates  for  1908  were  far  below  the  normal  — 
i.  e.  what  they  will  be  when  the  steady  increase  in  rates  due  to 
the  deferred  assessment  method  of  insurance  will  have  ceased 
and  rates  will  have  reached  a  stage  of  equilibrium.  (3)  The 
English  premiums  cover  all  the  cost  of  insurance.  The  Nor- 
wegian premiums  do  not,  the  expenses  of  management,  amount- 
ing to  11^  +,  being  paid  by  the  state.  And  the  German  pre- 


*  Experience  has  shown  that  these  rates  have  been  far  below  cost;  and 
the  Norwegian  insurance  office  has  doubtless  raised  them. 


28 

mi  urns  do  not  cover  any  of  the  expenses  of  management,  and  do 
not  procure  complete  insurance.  Therefore  the  comparison  is 
unfair  to  England.  To  calculate  approximately  comparative 
cost  from  comparative  rates  11$  +  x$  should  be  added  to  the 
Norwegian  rates  and  16$  +  y$  to  the  German  rates. 

The  conclusion  from  a  study  of  comparative  rates  is  that 
the  English  system  of  voluntary  insurance  in  private  companies 
in  spite  of  the  heavier  expenses  of  management  costs  little  more, 
if  not  less  on  the  average,  than  state  or  compulsory  mutual  insur- 
ance, and  costs  much  less  for  well  equipped  and  well  conducted 
establishments  than  state  insurance. 

In  dismissing  this  topic  it  should  be  emphasized  that  free 
competition  does  not  necessarily  result  in  sound  and  cheap  insur- 
ance. How  to  bring  about  that  result  is  another  problem. 
What  is  here  contended  is  that  that  problem  has  been  solved  in 
Great  Britain,  and  that  the  British  form  of  insurance  is  the 
desideratum,  and  consequently  should  not  be  rejected  on  the 
score  of  cost,  if  it  is  otherwise  more  sound  and  satisfactory. 

Accident  Reduction.  Employer's  individual  liability  for 
compensation  which  —  as  has  been  shown  —  is  the  basic 
principle  of  nearly  all  the  compensation  laws,  is  an  effective 
regulation  for  accident  reduction.  Those  wTho  advocate  that 
law  for  that  purpose  are  rightly  wary  of  insurance  schemes, 
because  insurance  defeats  that  purpose  if  the  rate  of  insurance 
in  any  trade  is  below  the  cost  of  the  direct  liability,  or,  where 
insurance  is  compulsory,  if  the  rates  for  competitors  in  the  same 
trade  are  not  so  differentiated  as  to  be  closely  proportionate 
to  the  risks  in  each  establishment.  To  be  exact,  the  harm  from 
such  improper  insurance  rates  varies  under  different  conditions. 
It  is  immaterial  in  many  miscellaneous  unorganized  employ- 
ments wherein  the  employers  have  really  little  or  no  control  over 
the  occupational  risks.  But  in  the  organized  and  hazardous 
industries  generally,  that  is,  in  those  very  industries  wherein 
the  inordinate  increase  of  work-accidents  has  caused  the  pre- 
vailing demand  for  reform  in  the  law  of  employer's  liability, 
it  is  most  serious. 


29 

The  bad  effect  of  too  cheap  a  rate  for  insurance  in  organized 
hazardous  trades  is  illustrated  by  experience  in  Austria,  where 
nearly  all  the  insurance  institutions,  by  fixing  rates  too  low 
for  some  large  hazardous  industries  —  with  strong  political 
influence, —  have  clearly  encouraged  the  use  of  dangerous  means 
and  methods  of  production  in  those  industries. 

The  bad  effect  of  a  "  flat  rate  "  may  be  illustrated  by  an 
actual  case  under  the  operation  of  the  insurance  law  of 
Washington.  There  are  or  were  in  that  State,  when  the  law 
took  effect,  three  powder  mills  —  the  Dupont  Company's  and 
two  others  —  which  for  convenience  will  be  designated  A,  B, 
and  C.  Powder  mills  are  in  a  class  by  themselves  and  workmen 
injured  therein  must  look  for  compensation  to  a  fund  raised  by 
a  tax  upon  the  payrolls  of  such  mills  alone.*  Of  those  three 
mills,  A  (the  Dupont  Co.'s)  had  an  annual  payroll  of  $144,000 
and  its  annual  tax  was  $14,400.  B  had  a  payroll  of  $15,000 
and  its  tax  was  $1,500.  C  had  a  payroll  of  $9,000  and  its 
tax  was  $900.  This  being  the  first  year  of  the  scheme  the 
fund  is  limited  to  the  amounts  received  from  these  three  items 
of  taxation.  A  is  a  branch  of  one  of  the  largest  powder  manu- 
facturers in  the  United  States.  It  employs  none  but  competent 
and  experienced  workmen,  and  its  operations  are  supervised  by 
a  staff  of  highly  skilled  experts.  It  avoids  the  use  of  com- 
pounds and  methods  which  experience  has  shown  to  be  too 
unsafe  to  be  used  in  the  manufacture  of  powder.  It  has 
spread  its  buildings  over  a  large  tract  of  ground  and  has 
so  segregated  its  departments  that  a  general  disaster  is  almost 
impossible. f  On  the  other  hand  C  was  what  may  be  termed 
a  "  wild  cat "  concern,  and  was  conducted  with  cheap  labor, 
regardless  of  experience  and  in  non-compliance  with  state 
regulations.  An  explosion  occurred  in  C,  which  almost  wiped 
it  out  of  existence  and  killed  eight  workwomen.  The  exact 


*  It  should  be  noted  that  this  does  not  distribute  the  risk  adequately, 
and  consequently  is  vitally  defective  as  insurance.  In  this  respect  the 
Washington  law  is  much  worse  than  anything  to  be  found  abroad. 

f  See  "  A  Xovelty  in  Legislation,"  by  Will  G.  Graves,  of  Spokane, 
Wash. 


30 

amount  of  compensation  due  the  dependents  of  these  deceased 
workwomen  is  in  dispute,  but  it  might  have  been  $32,000 ; 
—  in  which  event  A  would  have  been  taxed  $14,400,  and  would 
be  liable  to  an  additional  assessment  of  almost  equal  amount 
to  pay  for  the  consequences  of  C's  bad  methods  of  business. 
As  a  matter  of  fact  A  has  not  paid  its  assessment,  but  is  liti- 
gating or  proposes  to  litigate  to  test  the  constitutionality  of  the 
law.f  Assuming  the  foregoing  statements  to  be  correct — and 
if  they  happen  to  be  inexact  it  does  not  Affect  the  argument, — 
until  that  litigation  is  terminated  all  of  the  compensation,  ex- 
cept a  few  hundred  dollars  actually  paid  into  the  fund,  must 
be  paid  by  -B  or  not  paid  at  all,  or  be  assessed  on  employers  gen- 
erally. If  eventually  A  and  B  be  compelled  to  pay,  the  result 
will  be  a  crushing  tax  on  their  payrolls  for  the  encouragement 
of  wildcat  competition.  As  for  the  future,  let  us  suppose  that 
B  operates  with  medium  safety  so  as  in  the  long  run  exactly  to 
consume  its  contributions  to  the  fund,  then  what  will  be  the 
effect  on  A  ?  Undoubtedly  there  will  be  a  succession  of  minor 
competitors  like  C,  without  capital  or  experience,  that  will 
run  every  risk  for  the  chance  of  profit.  Certainly  their  ratio 
of  losses  will  far  exceed  A's,  and  A  will  have  to  pay  the 
lion's  share  of  that  excess.  Can  it  stand  such  competition,  or 
will  it  be  induced  to  skimp  its  expenditures  for  safety  and  thus 
be  drawn  down  towards  the  level  of  its  competitors  ?  Economic 
sense  points  emphatically  to  the  conclusion  that  it  will  be 
drawn  down. 

There  is  an  idea  prevailing  that  the  state  can  prevent  any 
such  consequence  by  factory  inspection  and  safety  regulations. 
To  a  limited  degree  only  is  that  practicable.  In  the  above 
described  case  establishment  C  was  operating  in  violation  of 


f  It  is  an  amusing  illustration  of  the  obtuseness  of  bureaucrats  to 
the  imperfections  of  their  schemes,  that  the  Washington  insurance  officials 
are  indignant  at  the  Dupont  Company  for  resisting  the  gross  injustice 
attempted  to  be  inflicted  upon  it;  and  that  their  retort  to  the  complaint 
of  that  company  is  in  effect  that  it  is  a  wicked  trust.  (Human  Engineer- 
ing, April,  1912,  p.  20). 


31 

official  regulations  and  orders,*  but  A  has  to  pay  the  penalty 
therefor.  It  is  true  that  in  a  long  course  of  years  factory 
inspection  may  force  all  establishments  like  C  to  be  con- 
ducted with  the  medium  degree  of  safety  which  we  have  sup- 
posed characterizes  B,  but  it  certainly  cannot  force  establish- 
ments of  the  classes  of  B  and  C  up  to  the  high  grade  of  safety 
which  characterizes  A.  Police  laws  and  police  can  no  more 
make  perfect  factories  than  they  can  make  perfect  men ;  —  they 
can  only  prevent  specific  acts  of  wrong.  To  make  perfect  fac- 
tories—  i.  e.  factories  that  are  as  safe  as  practicable  —  the 
law  should  bestow  an  economic  advantage  upon  safety.  "  Flat 
rate  "  insurance,  where  imposed  by  law,  on  the  contrary,  legally 
penalizes  it. 

It  should  be  understood  in  this  connection  that  it  is  not  the 
opinion  of  industrial  experts  that  either  the  direct  liability 
for  compensation  or  insurance  at  proper  rates  by  itself  will 
have  any  great  and  continuous  effect  in  reducing  accidents. 
To  produce  that  result  the  compensation  liability  must  be  con- 
joined with  proper  safety  regulations  and  expert  inspection 
and  enforcement.  But,  on  the  other  hand,  insurance  at  im- 
proper rates  does  have  a  powerful  negative  effect  in  discouraging 
accident  prevention,  f  In  other  words  the  way  to  danger  is 
easier  than  the  way  to  safety. 

Great  Britain  and  its  colonies  depend  for  accident  pre- 
vention upon  the  employer's  direct  liability  for  compensation 
in  conjunction  with  state  regulations  and  factory  inspection. 

The  conclusion  of  the  British  Departmental  Committee 
on  Accidents  upon  the  effect  of  this  system  in  accident  re- 
duction, are  summarized  in  the  Annual  Report  of  the  Chief 
Inspector  of  Factories  for  1910,  p.  vii  (Parliamentary  Papers 
for  1911,  Cd.  5963),  as  follows:  "They  find  that  while  the 
accident  risk  probably  remained  almost  constant  in  the  decade 
1897-1907,  any  increase  due  to  extended  use  of  machinery  and 


*  See  semi-official  statement    (Human  Engineering,  Apr.  1912,  p.  21). 
f  See  Address  by  the  writer  before  Massachusetts'   Bar  Association, 
Dec.  28,  1911. 


32 

greater  pressure*  being  counteracted  by  improved  inspection 
and  by  the  greater  care  resulting  from  the  Workmen's  Com- 
pensation Act,  it  has  decreased  since  1907,  owing  to  the  causes 
named  above  and  to  the  experience  of  employers  in  the  efficient 
guarding  of  machinery.  They  regard  the  increase  of  reported 
accidents  up  to  1907  as  due  almost  entirely  to  improvement  in 
reporting,  which  since  that  date  has  been  less  marked,  so  that 
the  effect  of  lessened  risk  has  shown  itself  in  the  statistics." 

Mr.  John  Calder,  a  leading  expert  in  industrial  safety, 
in  a  brief  filed  with  the  Congressional  Employers'  Liability 
Commission  (Report  of  Hearings,  Pt.  2,  p.  768),  describes 
the  effect  of  the  British  compensation  acts  as  follows : 

(1)  An    immediate    increase    in    the   total    volume    of 
reported  accidents. 

(2)  An  immediate  and  large  increase  in  the  volume 
of  reported  trivial  and  non preventable  accidents,  followed. 
by  a  continued  but  not  so  large  annual  increase. 

(3)  An  improvement  in  safeguarding  and  safe  working 
precautions  due  to  the  attention  of  factory  inspectors  being 
concentrated  on  safety  measures,  to  the  pressure  from,  the 
skilled   inspectors   of   the   insurance  underwriters    and   to 
differential  insurance  rates  being  conceded  in  return  for 
proved  reduction  of  risks,  etc. 

(4)  A  reduction  in  the  rate  of  serious  and  preventable 
accidents,   irregularly  varied  for  particular  industries   by 
temporary  increases  due  to  trade  pressure  in  busy  seasons; 
—  this   reduction   in  rate   being  obscured  by   a   slow  but 
perceptible  rise  in  the  annual  total  of  such  accidents,  due 
to  an  increase  in  the  number  of  people  employed. 

That  the  compensation  liability  has  had  a  powerful  effect 
in  the  line  of  accident  prevention  see  also  testimony  of  Messrs. 

*  It  should  be  borne  in  mind  that  the  first  stage  in  accident  prevention 
is  to  check  the  progressive  increase  in  the  ratce»  of  work  accidents  incident 
to  the  modern  developments  in  industries.  How  much  beyond  that  accident 
prevention  can  effect  is  uncertain. 


33 

Gill  and  Clynes,  M.  P.  before  the  New  York  Employers'  lia- 
bility Commission  (Minutes  of  Evidence,  1910,  pp.  81,  89). 

In  Germany  accident  prevention  in  industries  rests  largely 
with  the  employers7  mutual  accident  insurance  associations. 
These  associations  having  a  strong  interest  to  reduce  the 
number  of  accidents,  the  law  has  conferred  on  them  the  power, 
subject  to  approval  by  the  appropriate  authorities,  to  prescribe 
preventive  rules  and  regulations,  and  to  send  inspectors  at 
any  time  into  any  factory  or  establishment  in  the  association 
to  see  that  these  rules  and  regulations  are  complied  with.  The 
inspectors  of  each  association  are  experts  in  its  line  of  work, 
and  are  in  no  way  subject  to  politics.  On  their  reports  and 
according  to  actual  rates  of  accidents  the  establishments  in 
each  association  are  assigned  to  the  various  classes  in  its  risk 
tariff ;  and,  as  before  stated,  the  rates  of  assessment  are  graded 
according  to  such  risk  tariff. 

The  results  in  the  industrial  associations  from  1888-1907 
have  been  as  follows: 

(1)  While  the  total  volume  of  fatal  injuries  has  steadily 
increased,  the  ratio  thereof  to  the  number  of  persons  em- 
ployed  has   remained   nearly   constant    at   about   O.fiS    per 
1,000. 

(2)  The  total  volume  of  injuries  causing  permanent 
total  disablement  has  been  largely  reduced,  the  ratio  thereof 
being  reduced  from  0.43  to  0.06  per  1,000. 

(3)  The  number  of  injuries  causing  permanent  partial 
disability  compensated  for  has  trebled  and  the  ratio  thereof 
has  increased  from  2.38  to  3.36  per  1,000. 

(4)  The  number  of  temporary   injuries   compensated 
for  (lasting  over  13  weeks)  *  has  increased  tenfold  and  the 
ratio  thereof  has  increased  from  0.68  to  4.26  per  1,000. 

The  results  from  1890  to  1907  in  the  agricultural  associa- 
tions (which  cover  forestry)  have  been  as  follows: — 


Over  78%  of  all  injuries  reported  lasted  less  than  13  weeks. 
3 


34 

(1)  The  ratio  of  fatal  injuries  has  remained  nearly 
constant  at  about  0.25  per  1,000. 

(2)  The  ratio  of  injuries  causing  permanent  total  dis- 
ability has   remained  nearly  constant   at   about   0.05    per 
1,000. 

(3)  The  ratio  of  injuries  causing  permanent  partial 
disability  compensated  for  has  increased  from  0.67  to  2.42 
per  1,000. 

(4)  The  ratio  of  temporary  injuries  compensated  for 
has  increased  from  0.60  to  2.88. 

A  comparison  of  items  (2)  and  (3)  indicates  that  accident 
prevention  has  been  far  less  successful  in  the  agricultural 
than  in  the  industrial  associations. 

For  more  comprehensive  data  on  this  subject  see  Report 
of  Imperial  German  Government  Commission  on  Workmen's 
Insurance.  (Eeichstag  Doc.  No.  340,  12th  Leg.  Period,  2d 
Session,  1909-10). 

In  Austria  the  insurance  associations  are  organized  by 
territorial  districts  instsad  of  by  industries,  and  their  rates 
have  been  unfair;  and  the  conduct  of  factory  inspection  is 
bureaucratic.  The  following  is  a  comparison  of  the  ratios  of 
injuries  per  1,000  "  full-time  workers"  in  1890  and  1906. 
(Note  that  agriculture  is  not  covered). 

Requiring  compensation.  Not  requiring  compensation 

Fatal      Not  fatal  (Lasting  less  than  4  weeks) 

1890           0.67           7.52  11.3 

1906           0.63*       17.59  44.97 

Allowing  for  differences  in  the  method  of  calculation  and 
tabulation  these  figures  are  less  favorable  than  those  of 
Germany  for  industrial  accidents. 

In  France  there  is  state  inspection  and  regulation  and  the 
direct  liability  for  compensation.  Published  insurance  rates 

*  The  ratio  of  fatal  accidents  has  not  really  decreased,  but  has  varied 
from  year  to  year  —  the  year  1905  showing  a  ratio  of  0.68.  The  increase 
in  the  other  ratios  has  been  steady. 


35 

have  been  rather  "  flat,"  but  the  companies  discriminate,  favor 
good  risks  and  decline  or  penalize  bad  ones. 

The  results  from  1904  to  1910  are  as  follows : 

The  ratio  of  fatal  injuries  has  remained  nearly  constant. 
The  ratio  of  injuries  causing  permanent  disability  has 
remained  nearly  constant. 

The  ratio  of  temporary  injuries  has  increased  about  50$. 
(See  Market  World  &  Chronical,  1912). 

In  Norway  there  has  been  no  co-operation  between  the  state 
insurance  office  and  the  government  department  of  inspection. 
And  admittedly  the  Norwegian  insurance  can  have  no  effect  for 
accident  reduction.  (Frankel  and  Dawson,  p.  50.)  Un- 
fortunately statistical  data  of  accidents  in  Norway  are  not 
available  in  any  language  known  to  the  writer. 

In  The  Netherlands  the  insurance  is  said  to  be  ineffective 
for  accident  prevention;  (Frankel  and  Dawson,  p.  61). 

In  Italy  a  voluntary  association  of  employers  for  the  pre- 
vention of  accidents  and  the  introduction  of  safety  devices  is 
reported  to  have  been  most  effective.  (Frankel  and  Dawson, 
pp.  87-881). 

Comprehensive  scientific  investigation  of  industrial  ac- 
cident prevention  is  still  in  its  infancy;  and  statistics  of  in- 
dustrial accidents  are  not  yet  sufficient  to  demonstrate  much 
in  regard  to  the  relative  efficiency  of  the  various  laws  in  the 
line  of  accident  reduction.  Consequently  in  arriving  at  con- 
clusions on  this  question  it  is  proper  to  rely  principally  upon 
the  opinions  of  experts  in  industrial  safety.  The  prepon- 
derance of  such  expert  opinion  is  that  the  British  and  German 
laws  have  been  the  most  effective  in  that  direction;  and  that 
the  Norwegian  and  Austrian  laws  are  comparatively  in- 
efficient. And  such  statistical  data  as  is  available  confirms 
such  opinion. 

Adjustments  and  Litigation.  A  principal  purpose  and 
advantage  of  the  compensation  law  is  that  it  reduces  the  waste 


36 

and  burden  of  litigation  incident  to  the  administration  of  the 
old  law  of  negligence. 

In  Great  Britain  and  its  colonies  (New  South  Wales  ex- 
cepted)  adjustments  are  made  directly  between  the  employer 
or  his  insurer  and  the  injured  workman  or  his  dependents.  In 
case  of  dispute  the  questions  at  issue  are  determined  judicially, 
under  special  and  appropriate  rules  of  practice  and  procedure. 

In  France  the  general  practice  is  the  same;  but  there 
is  more  bureaucratic  supervision  and  interference.  And  the 
same  is  true  of  some  other  of  the  direct  liability  countries  on  the 
continent. 

In  Denmark  claims  are  adjusted  by  the  state  insurance 
office ;  and  the  employer  or  his  insurer  is  bound  to  make  pay- 
ments according  to  such  adjustment.  In  Sweden  the  practice  is 
similar. 

In  The  Netherlands  all  adjustments  are  made  by  the  Royal 
Insurance  Bank;  but  an  appeal  lies  to  the  courts  from  its 
awards. 

In  Germany  awards  are  made  in  first  instance  by  the  em- 
ployers' insurance  associations,  ex-parte ;  but  are  often  preceded 
by  something  closely  resembling  a  trial.  From  such  awards 
appeals  lie  to  Courts  of  Arbitration.*  And  from  a  decision  of 
any  such  court  an  appeal  (called  a  "  recourse  ")  lies  to  the 
Imperial  (or  State)  Insurance  Office. 

In  Norway  the  State  Insurance  Office  makes  all  adjustments, 
generally  through  communal  officials;  and  its  awards  are  final. 

It  is  claimed  that  the  method  of  adjustment  resorted  to  in 
Norway  and  Denmark  is  the  best,  that  the  German  method 
breeds  litigation,  and  that  the  English  method  has  increased 
litigation  even  over  the  old  negligence  law. 

The  assertion  that  the  English  compensation  law  has  in- 
creased litigation  is  founded  upon  a  confusion  of  ideas.  Be- 
cause the  compensation  acts  of  1897  and  1906  in  the  aggregate 
have  increased  nearly  tenfold  the  number  of  cases  in  which  some- 


*  As  to  practice  on  review  of  revisions  of  awards,  see  Code  of  1911, 
Arts.  1600-7. 


37 

thing  is  recoverable  for  work-injuries  they  have  naturally 
increased  the  number  of  cases  which  appear  on  the  court 
dockets  for  trifling  motions,  etc.  And  each  act  in  turn  gave  rise 
to  a  number  of  cases  involving  questions  of  construction,  which 
for  a  short  time  increased  litigation.  But  now.  the  ratio  of 
litigation  has  much  decreased,  and  the  volume  and  delays  of 
litigation  have  both  enormously  decreased.  Official  returns  for 
1909  give  the  ratio  of  claims  settled  judicially  as  less  than  20$ 
in  fatal  cases  and  less  than  l/o  of  1$  in  cases  of  disablement. 
(N.  Y.  Journal  of  Commerce,  Oct.  25,  1910.)  And  the  figures 
for  one  insurance  company  for  the  year  1908  (cited  by  Mr. 
Packer  in  Appendix  to  Report  of  Congressional  Employers' 
Liability  Commission,  p.  103)  show  that  out  of  10,343  acci- 
dents there  were  only  55  claims  (0.5  per  cent.)  for  "  damages  " 
under  the  retained  law  of  negligence,  and  only  123  arbitrations 
before  a  judge  (1.2  per  cent.)  under  the  compensation  act. 
And  the  expert  testimony  of  Messrs.  Gill  and  Clynes,  M.  P.,  be- 
fore the  N.  Y.  Employers'  Liability  Commission  (Minutes  of 
Evidence,  1910,  pp.  77,  81,  82,  86,  90)  was  to  the  effect  that 
litigation  has  very  much  decreased  —  that  adjustments  are 
generally  automatic.* 

In  Germany  the  question  is  more  complex.  There  is  endless 
red  tape  and  much  complaint  of  litigation.  Herr  Friedensburg 
declares  that  appeals  are  fostered  by  the  Imperial  Insurance 
Office.  And  the  workpeople  complain  of  the  ex-parte  awards  of 
the  employers'  associations.  But  there  is  some  exaggeration  in 
these  complaints.  Strictly  the  original  awards,  while  more 
cumbersome  and  less  automatic  than  the  direct  adjustments 
under  the  English  law,  do  not  involve  litigation ; —  real  liti- 
gation commences  with  appeal  to  the  Courts  of  Arbitration. 
According  to  Herr  Brodsky  ("  The  Survey,"  !N".  Y.,  May  4, 
1912),  in  1910  17.5$  of  awards  were  so  appealed;  and  30$  of 
the  decisions  of  the  Courts  of  Arbitration  were  again  appealed 
to  the  Imperial  (or  State)  Insurance  Office.  This,  he  declares, 


*  Note  that  compensation  is  even  now,  'May,  1912,  being  adjusted  for 
losses  on  the  Titanic. 


38 

is  a  decrease  in  the  ratio  of  appeals  to  the  lower  courts  and  no 
increase  in  the  ratio  of  appeals  to  the  higher.  Moreover,  he 
points  out  that  a  large  proportion  of  the  cases  so  appealed  deal 
with  the  difficult  matter  of  revision  of  pensions  due  to  changed 
conditions  on  the  part  of  the  beneficiaries* —  a  most  important 
matter  which  is  more  or  less  ignored  in  the  laws  of  other  bureau- 
cratic countries,  but  a  matter  in  which  there  is  grave  danger  of 
abuse,  if,  as  in  Germany,  frequent  applications  upon  trifling 
grounds  are  tolerated  without  penalty. 

The  Norwegian  and  Danish  method  of  adjustment  and 
conclusive  awards  by  administrative  officers  practically  elimi- 
nates all  formal  litigation,  and  so  far  as  we  know  —  there  being 
little  information  available  of  the  actual  workings  of  the  law 
in  those  countries  and  what  little  there  is  coming  from  official 
and  prejudiced  sources  —  there  is  little  complaint.  But 
although  this  method  eliminates  litigation  it  leaves  the  ad- 
ministrative officers  open  without  check  to  irregular  appeals 
to  their  discretion  and  subject  to  various  improper  influences. 
An  award  of  compensation,  whether  the  compensation  is  payable 
from  a  fund  for  which  employers  or  a  group  of  employers  are 
taxed  or  by  an  employer  directly,  takes  the  property  of  one 
person  or  group  of  persons  and  gives  it  to  another  person.  Ex- 
perience demands  that  before  that  should  be  done  the  party  or 
group  to  be  deprived  of  property  should  have  a  reasonable 
opportunity  to  submit  the  facts  and  to  be  heard  upon  the  law, 
and  that  the  application  of  the  law  to  the  facts  should  be 
determined  judicially.  There  is  no  more  justice  or  expediency 
in  the  proposition  that  a  person  or  persons  should  be  taxed  to  pay 
compensation  in  a  given  case  according  to  the  unbridled  discre- 
tion of  administrative  officers  than  that  a  person  should  be  com- 
pelled to  pay  damages  for  an  alleged  wrong  to  a  stranger  or  for 
a  breach  of  contract,  in  like  discretion.  If  this  method  of  de- 
termining rights  and  liabilities  be  sound  and  expedient,  then 
all  judicial  procedure  should  be  abolished;  for  administrative 
procedure  is  quicker  and  cheaper  than  judicial  procedure.  It' 


*  See  Code  of  1911,  Arts.  608,  1600-7. 


39 

is  to  be  noted  that  when  the  practice  of  administrative  adjust- 
ments and  awards  was  adopted  in  the  Ohio  law,  it  was  modified 
by  a  provision  that  the  claimant  may  appeal  from  such  ad- 
ministrative decision.  In  other  words,  it  was  deemed  right 
not  to  conclude  claimants  by  such  a  doubtful  method  of  de- 
termination. Why  then,  in  common  fairness,  should  the 
liabilities  of  those  who  have  to  pay  the  bills  be  so  concluded? 
NOT  is  it  just  or  expedient  that  the  parties  liable  for  compensa- 
tion should  be  wholly  dependent  upon  the  care  and  means  of 
uninterested  bureaucratic  officials  for  protection  from  the  bur- 
den of  frauds  and  exaggerations.  Employers  directly  liable  and 
their  insurers,  having  an  immediate  interest,  are  on  the  watch 
to  detect  fraudulent  and  exaggerated  claims  in  a  manner  which 
cannot  be  expected  of  state  officials.  That  they  meet  with 
undue  favor  and  thereby  succeed  unduly  in  resisting  claims 
is  contradicted  by  all  experience.  Whatever,  therefore,  may 
be  the  success  —  which  is  uncertain  —  of  the  Norwegian  and 
Danish  method  of  adjustment,  under  the  peculiarly  favorable 
conditions  in  those  countries,  that  method  is  nevertheless  far 
too  dangerous  a  model  to  imitate. 

Abuses.  Like  every  other  good  thing  the  compensation 
law  has  its  specific  abuses.  The  principal  are  malingering, 
simulation,  etc.,  "  doctors'  graft  "  and  discrimination  in  employ- 
ment against  the  aged  and  infirm.  There  are,  naturally,  no 
accurate  data  of  the  extent  of  these  abuses;  but,  upon  the 
principle  that  where  there  is  much  smoke  there  must  be  some 
fire,  undoubtedly  they  are  common. 

The  inclination  upon  slight  excuse  to  take  an  occasional 
vacation  at  half  pay  is  common  to  human  nature;  and  conse- 
quently the  compensation  laws  give  rise  to  much  malingering, 
except  where  there  is  a  "  waiting  period  "  sufficiently  long  to 
check  it.  Complaints  of  malingering  are  loudest  in  France  and 
Italy,  where  the  waiting  periods  are  short,  and  are  common  in 
England  where  the  right  to  compensation  reverts  back  if 
malingering  be  continued  long  enough.  There  is  also  pome 
complaint  of  it  in  Germany,  in  spite  of  the  fact  that  compensa- 


40 

tion  for  the  first  13  weeks  is  dispensed  principally  from  the 
sickness  insurance  funds,  to  which  the  workmen  contribute 
heavily. 

Simulation,  exaggeration  and  various  forms  of  fraudulent 
impositions  find  their  most  fertile  fields  where  compensation 
is  dispensed  by  governmental  routine.  Admittedly  they  are  the 
bane  of  the  statet-insurance  institution  of  Italy.  And  they  are 
said  by  Herr  Friedensburg  to  be  increasing  under  the  German 
system,  owing  to  a  disposition  on  the  part  of  the  state  officials 
to  treat  the  right  to  compensation,  not  as  a  juridical  question 
to  be  determined  according  to  the  law,  but  as  a  matter  in  which 
every  doubt  is  to  be  resolved  in  favor  of  charity.  If  such  a 
disposition  is  manifested  in  Germany,  against  the  opposition  of 
the  employers'  associations,  a  yet  more  "  liberal "  policy  of 
awards  is  to  be  feared  from  purely  political  insurance  systems 
like  those  of  Norway,  Sweden,  France,  Italy,  and  The 
Netherlands.  It  does  not  appear  that  the  state  insurance  offices 
of  those  countries  go  to  sufficient  expense  to  guard  against  im- 
positions. Certainly  they  do  not  do  so  if  their  true  total 
"  expenses  of  administration "  are  of  the  low  ratio  claimed. 
Either  they  are  not  guarding  sufficiently  against  these  most 
serious  abuses,  or  there  is  a  most  important  item  omitted  from 
their  estimates  of  "  expenses  of  management."  It  would  appear 
that  the  desire  to  show  low  expenses  of  management  has  induced 
them  to  neglect  precautions  against  imposition. 

"  Doctors'  graft "  under  the  French  law  is  an  abuse  almost 
equivalent  to  "  ambulance  chasing "  in  America.  Generally 
it  is  attributed  to  the  fact  that  under  that  law  an  injured  work- 
man may  choose  his  own  physician.  But  probably  it  is  un- 
avoidable under  any  law  which  entitles  an  injured  workman  to 
medical  attendance  at  his  employer's  expense  "  whenever 
necessary  " ;  for  then  any  physician  may  attend  in  the  absence 
of  the  employer's  physician,  and  before  a  jury  his  word  will 
be  as  good  as  any  one's  that  his  attendance  was  necessary.  This 
abuse  is  checked  where  there  is  separate  sickness  insurance, 
and  where,  as  in  Italy,  the  employer's  liability  is  for  "  first 


41 

aid  "  only.  And  it  does  not  exist  where,  as  in  England,  there 
is  no  compensation  liability  for  medical  care.  And  English 
experience  leaves  it  doubtful  whether  there  is  any  need  for  such 
a  liability,  the  employer  being  under  strong  incentive,  from  his 
liability  for  compensation,  to  furnish  all  proper  medical  treat- 
ment —  and  the  best  treatment. 

Discrimination  in  employment  against  the  aged  is  com- 
plained of  in  England,  but  is  an  evil  of  disputed  proportions. 
That  it  exists  at  all  is  more  generally  denied  (see  testimony 
of  Mr.  Gill,  M.  P.,  before  N.  Y.  Employers'  Liability  Com- 
mission, "  Minutes  of  Hearings,  1910,"  p.  76).  But  it  is  more 
reasonable  to  suppose  that  employers  do  so  discriminate  con- 
siderably, not  only  because  the  aged  are  somewhat  more  liable 
to  injury  as  would  appear  from  the  German  statistics  but  also 
and  more  particularly  because  accidents  to  elderly  persons  often 
lead  to  permanent  disabilities  caused  not  so  much  by  the  in- 
juries as  by  old  age,  and  which  consequently  obligate  the  em- 
ployers to  pay  what  are  in  effect  old  age  pensions  in  addition 
to  compensation  for  the  injuries.  It  is  difficult  to  form  an 
estimate  of  the  extent  of  this  discrimination,  because  there 
is,  independently  of  this  cause,  a  universal  preference  for 
younger  men  in  taking  on  new  workmen,  particularly  in  the  more 
hazardous  industries.  But  whatever  may  be  the  extent  of  this 
discrimination  elsewhere,  it  is  almost  entirely  avoided  in  Nor- 
way and  New  South  Wales,  because  there  individual  employers 
are  not  much  concerned  financially  with  the  number  and  conse- 
quences of  injuries  to  their  respective  employees;  and  probably 
it  is  reduced  in  Germany  by  the  fact  that  work-accident  disability 
and  old  age  disability  are  there  distinguished,  and  each  is  pro- 
vided for  by  a  separate  system  of  e^Scompensation. 

State-Insurance  in  competition  with  Private  Insurance. 

In  France,  The  Netherlands,  Sweden  and  New  Zealand  the 
state  sells  compensation  insurance  in  competition  with  private 
companies.  In  Italy  a  state  supervised  and  favored  association 
of  savings  banks  does  the  same. 

In  France  the  state  insures  against  the  liability  for  death 
or  permanent  disability  only.  Naturally  this  partial  insurance 


42 

is  seldom  taken,  and  about  99^  of  the  insurance  is  placed  else- 
where —  principally  in  stock  companies. 

In  Italy  private  insurance  is  handicapped  in  competition 
with  the  National  Accident  Insurance  Fund  by  the  facts  that 
the  latter  is  not  operated  for  profit,  escapes  many  items  of  ex- 
pense in  management  by  the  free  co-operation  of  the  Post  Office 
and  of  local  officials,  and  is  favored  by  a  remission  of 
taxes.  In  The  Netherlands  private  insurance  is  handicapped 
by  the  fact  that  those  who  insure  in  private  companies  are  never- 
theless taxed  for  the  expenses  of  management  of  the  state  in- 
surance office  (other  than  one-half  the  salaries  of  employees, 
which  are  paid  by  general  taxation.)  And  in  Sweden  private 
insurance  is  handicapped  by  the  fact  that  the  expenses 
of  management  of  the  state  insurance  office  —  including  com- 
missions to  agents  —  are  paid  by  general  taxation,  whereas  the 
expenses  of  management  of  the  private  companies  must  be  paid 
by  the  policy  holders.  And  in  all  these  countries  private  insur- 
ance is  further  handicapped  by  the  fact  that  only  insurance  in 
the  state  insurance  office  discharges  the  employer's  individual 
liability.  In  New  Zealand  alone  is  the  competition  fair. 
Under  these  conditions  private  companies  are  winning  the  field 
in  New  Zealand,  holding  their  own  in  Italy  and  The  Nether- 
lands and  yielding  ground  only  slowly  in  Sweden.  If  this 
experience  leads  to  any  conclusion  it  is  that  private  companies, 
through  superior  knowledge  and  efficiency,  sell  cheaper  or  more 
satisfactory  insurance.  The  trouble  with  state-insurance  under 
competition  has  been  that  the  state  insurance  office  gets  nearly 
all  the  bad  risks  and  the  risks  in  those  lines  in  which  it  acci- 
dentally places  its  rates  too  low,  and  then  has  to  compete  with 
the  private  companies  for  the  good,  paying  business. 

The  avowed  objects  of  state-insurance  are  to  eliminate  profits 
and  to  keep  down  rates.  In  competition  with  private  insurance 
state-insurance  has  not  demonstrated  its  effectiveness  for  the 
latter  purpose.  It  is  therefore  being  sought  in  Italy  and 
Sweden,  by  increasing  the  privileges  of  and  the  favors  to  the 
state  insurance  office,  to  eliminate  private  competition,  with  a 
view  to  arriving  ultimately  at  a  state  monopoly,  as  in  Norway. 


43 


And  this  movement,  actuated  on  the  part  of  the  state  officials  by 
a  desire  to  reduce  expenses  of  management  by  eliminating 
the  expenses  of  competition,  etc.,  is  being  aided  by  a  political 
tendency  towards  socialism.  The  choice,  therefore,  seems  to  lie 
between  monopolistic  state-insurance  on  the  one  hand  and  no 
state-insurance  at  all  on  the  other. 

Tendency.  There  is  a  common  impression  in  America  that 
the  European  work-accident  compensation  laws  have  been  de- 
veloping in  the  direction  of  state-insurance.  This  impression 
is  far  from  being  accurate.  The  various  compensation  laws 
were  enacted  in  the  following  order: 


Germany,  1884. 
Austria,  1887. 
Norway,  1894. 
Finland,  1895. 

Great  Britain,  1897. 
Denmark,  1898. 
France,  1898. 


Italy,  1898. 

Spain,  1900. 
Greece,  1901. 
Netherlands,  1901, 


Sweden,  1901. 

Luxemburg,  1902. 
Eussia,  1903. 
Belgium,  1903. 

Hungary,  1907. 


(Compulsory  mutual  insurance.) 
/  a  a  a          \ 

(Compulsory  state-insurance.) 
(Compulsory     insurance     or     se- 
curity. ) 
(Simple  liability.) 

(  "       "    o 

(Direct  liability  with  compulsory 
guarantee-  and  competitive 
state-insurance.) 

(Compulsory  insurance  and  com- 
petitive state-insurance. ) 

(Simple  liability.) 

(Compulsory  mutual  insurance.) 

(Compulsory  insurance  or  se- 
curity and  competitive  state-in- 
surance. ) 

(Simple  liability  and  competitive 
state-insurance. ) 

(Compulsory  mutual  insurance.) 

(Simple  liability.) 

(Direct  liability  with  compulsory 
guarantee-insurance. ) 

(Compulsory  mutual  insurance.) 


44 

• 
British  Colonies: 

New  South  Wales,  1900.        (Compulsory  mutual  insurance.) 
New  Zealand,  1900.  (Simple  liability  and  competitive 

state-insurance. ) 

South  Australia,  1900.  (Simple  liability.) 

West  Australia,  1902.  (     "  "       •) 

British  Columbia,  1902.         (     "  "       .) 

Queensland,  1905.  (     "  "       .) 

Cape  of  Good  Hope,  1905,     (     "  "    '  -) 

Transvaal,  1907.  (     "  «       .) 

Alberta,  1908.  (     «  "       .) 

Quebec,  1909.  (     «  "       •) 

Starting  in  Europe  with  a  system  of  compulsory  mutual  in- 
surance in  Germany,  which  was  promptly  (but  imperfectly) 
copied  in  Austria,  compensation  next  appeared  in  the  com- 
pulsory state-insurance  law  of  Norway.  It  is  generally  admitted 
that  this  form  of  insurance  was  not  adopted  with  any  idea  that 
it  was  an  improvement  upon  the  German  system,  but  because 
the  employers'  mutual  associations  of  that  system  would  be  im- 
practicable in  Norway.  Thereafter  there  came  a  reaction. 
First,  Finland  permitted  employers  to  insure  in  any  one  of 
several  ways;  and  Great  Britain  and  Denmark  stopped  short 
with  the  simple  liability.  Since  then  the  majority  of  the  other 
countries  have  adopted  the  law  of  employer's  direct  liability 
supplemented  by  various  provisions  designed  to  secure  its  pay- 
ment. Luxemburg  and  Hungary  have  merely  followed  their  big 
neighbors,  Germany  and  Austria.  And  while  Italy,  Sweden, 
and  The  Netherlands  have  adopted  and  maintained  competitive 
state-insurance  institutions  under  conditions  that  manifest  a 
tendency  to  revert  to  monopolistic  state-insurance  in  the  Nor- 
wegian form,  Spain,  Russia,  and  Belgium  on  the  contrary  — 
the  first  two  countries  by  their  laws  and  the  last  by  the  action 
of  its  insurance  officials  —  have  followed  the  conservative 
models. 

In  the  British  Colonies  the  tendency  away  from  state- 
insurance  has  been  decided.  New  South  Wales  started  off  with 


45 

compulsory  mutual  insurance,  supplemented  by  state  aid,  for 
its  miners.  Xew  Zealand  adopted  the  simple  liability  along 
with  competitive  state-insurance.  The  reaction  from  these 
empiric  social  experiments  was  prompt ;  and  all  the  other 
colonies  that  have  since  adopted  compensation  laws  have  fol- 
lowed the  example  of  the  mother  country  in  choosing  the  simple 
liability. 

Leaving  aside  the  manifest  tendency  towards  greater  assur- 
ance, and  towards  more  general  provision  of  insurance  against 
sickness,  etc.,  and  confining  ourselves  strictly  to  our  subject  of 
work-accident  compensation,  the  conclusion  is  that  the  foreign 
compensation  laws  do  not  show  any  tendency  towards  state- 
insurance.  . 

The  British  Law.  As  has  been  stated,  the  British  compen- 
sation law*  is  a  direct  liability  law,  which  imposes  no  obligation 
upon  and  offers  no  inducement  to  the  employer  to  insure. 
Nevertheless  insurance  is  general  although  not  universal  — 
many  large  establishments,  the  railroads  particularly,  carrying 
their  own  insurance.  Insurance  is  principally  in  stock  com- 
panies, but  there  are  some  important  mutual  associations  and 
establishment  funds. 

The  advantages  of  this  Jaw  are: — 

(1)  It  is  the  simplest  and  least  experimental  first  step  in 
the  line  of  departure  from  the  obsolete  law  of  negligence,  and 
at  the  same  time  is  the  form  of  compensation  law  most  readily 
adaptable  to  development  in  any  line  that  future  experience 
may  dictate. 

(2)  It  contests  with  the  German  "  industrial  accident  insur- 
ance "  law  for  the  supremacy  in  efficiency  in  accident  preven- 
tion. 

(3)  It  interferes  least  with  the  accustomed  liberties  of  the 
private  parties  affected. 

(-i)  It  avoids  the  abuses  and  dangers  of  bureaucracy  in- 
cident to  all  forms  of  compulsory  and  state  insurance. 


*  Now  contained  in  Act.  of  Dec.  21,  1906   (6  Edw.  7,  c.  58),  which  con- 
solidated and  extended  Acts  of  1897  and  1901. 


46 

(5)  It  adheres  to  the  pre-established  practice  of  judicial 
determination  of  juridical  questions. 

(6)  It  has  resulted  in  a  system  of  cheap,  satisfactory  and 
sound  insurance. 

The  proposition  that  it  has  led  to  "  satisfactory  "  insur- 
ance, to  be  exact,  requires  qualification.  Employers  nowhere 
are  satisfied  with  the  insurance  rates  charged  them.  But 
compared  with  the  Norwegian  or  German  employer  the 
English  employer  has  this  advantage,  that  if  he  be  dissatis- 
fied with  a  rate  given  him  he  is  free  and  may  reject  it,  and 
that  if  he  be  rightly  dissatisfied  therewith  he  can  generally 
arrange  cheaper  insurance;  whereas  the  Norwegian  or  Ger- 
man employer,  under  similar  conditions,  is  bound  and 
helpless. 

The  fact  that  insurance  does  not  discharge  the  employer's 
liability  is  an  advantage  of  the  English  law,  because  it  tends 
to  sound  insurance.  When  selecting  insurance  the  English 
employer  does  not  unqualifiedly  pick  out  the  insurer  with 
the  cheapest  rate,  but  demands  of  his  insurer  assured 
solvency.  On  the  contrary  where  insurance  in  any  approved 
company  discharges  his  liability,  the  employer  naturally 
seeks  the  approved  company  with  the  cheapest  rate;  and 
that  practice  inevitably  leads  to  entire  dependence  for 
solvency  upon  state  supervision  and  regulation  of  insurance. 
In  America,  if  we  adopt  compensation  laws,  it  would  be  the 
reverse  of  prudent  to  trust  altogether  to  that  one  method  of 
securing  sound  insurance.  For  then  many  "  mushroom  " 
liability  insurance  companies  would  probably  spring  up, 
and  induce  extreme  competition  and  dangerously  low  rates 
(of  which  we  have  a  warning  example  in  France). 

The  principal  objections  to  the  British  system  are  as 
follows : 

(1)  It  provides  no  certain  security  to  injured  workmen  for 
the  payment  of  their  compensation.  It  is  to  be  noted  that  this 
criticism  is  not  included  in  the  severe  arraignment  of  the  Eng- 
lish law  by  Mr.  Miles  M.  Dawson,  in  his  brief  filed  with  the 


47 

Congressional  Commission  on  Employers'  Liability  (1911)  J 
and  the  significance  of  this  omission  is  that  in  actual  experience 
in  England  there  has  been  almost  no  loss  from  the  omission  of 
any  requirement  of  security  (see  testimony  of  Mr.  Gill  before 
N".  Y.  Employers'  Liability  Commission,  "  Minutes  of  Evidence, 
1910,"  p.  81).  Looking  at  the  subject  practically,  it  is  obviously 
a  hundredfold  more  needful  to  require  of  employers  security 
for  their  contingent  liabilities  for  "  damages  "  under  our  exist- 
ing American  negligence  law?,  than  it  is  to  require  security  for 
the  contingent  liabilities  for  compensation  under  the  English 
law, —  and  yet  we  have  never  thought  it  necessary  to  do  so.- 
Why  then  merely  because  one  liability  is  substituted  for  an- 
other should  the  addition  of  a  requirement  for  security  be 
deemed  essential?  It  is  true  that  accrued  liabilities  for  long 
continuing  pension*  payments  under  the  compensation  law  sub- 
ject the  beneficiaries  to  the  risk  of  their  respective  employers 
continuing  solvent  during  such  periods ;  but  it  is  easy  to  require 
security  for  accrued  liabilities  without  requiring  general  in- 
surance in  advance;  (see  "  Security  —  accrued  liabilities"). 
It  is  also  possible  that  dummy  corporations  may  be  resorted  to  to 
defeat  the  liability  (a  practice  more  probable  in  America  than 
in  England)  ;  but  in  that  event  a  particular  remedy  can  be 
adopted  to  meet  that  particular  evil.  It  is  also  probable  that 
in  America  compulsory  security  may  prove  to  be  advisable 
in  some  trades.  It  would  be  absurd,  however,  to  subject  all  in- 
dustries to  unnecessary  bureaucratic  domination  or  to  launch 
the  state  in  an  uncertain  and  expensive  actuarial  experiment 
merely  to  forestall  the  possibility  of  an  abuse  that  has  not  arisen 
in  actual  practice. 

(2)  The  English  system  of  insurance  entails  heavy  ex- 
penses of  management,  which  mean  economic  waste.  As  has 
already  been  pointed  out  (see  "Cost")  a  part  of  these 
expenses  is  the  price  paid  for  the  advantages  of  competition. 


*  In  Great  Britain  compensation  to  dependents  is  payable  in  lump 
sums.  In  Denmark  and  Italy  compensation  for  permanent  injuries  also  is 
payable  in  lump  sums.  There  are  some  abuses  incidental  to  lump  sum 
payments,  but  they  do  not  affect  this  discussion. 


48 

That  price  can  be  saved  only  by  accepting  the  alternative  dis- 
advantages of  monopolistic  insurance. 

But  a  part  of  the  high  expenses  of  management  in  England 
is  due  to  the  difficulty  of  adjustment  of  the  compensation  in 
particular  cases,  which  in  turn  is  due  to  the  fact  that  the  scale 
of  compensation  in  the  British  law  requires  an  inquiry  into  the 
average  earnings  of  each  injured  person  for  a  year.  The  alter- 
native practice  is  to  use  the  day's  wage  for  the  day  of  injury, 
multiplied  by  a  certain  arbitrary  number  of  days,  to  estimate 
the  yearly  earnings,  and  to  have  a  fixed  schedule  of  compensa- 
tion for  particular  injuries.  In  a  law  applying  to  one  trade 
only  (e.  g.  the  Sutherland  Bill,  now  pending  in  Congress) 
it  is  practicable  to  incorporate  such  a  rule  and  schedule;  but 
in  a  law  applying  to  many  trades  it  would  work  gross  inequality 
and  injustice.  Nevertheless  it  is  possible  to  work  out  such  a 
rule  and  schedule  for  each  particular  trade  and  to  apply  it  in 
practice ;  and  that  has  been  done  more  or  less  in  Germany* 
by  the  trade  associations  in  co-operation  with  the  Imperial  In- 
surance Office,  and  by  the  State  Insurance  Office  in  Norway. 
But  only  slight  progress  has  been  made  in  that  direction  in 
England;  and  private  insurance  in  stock  companies  does  not 
lend  itself  to  that  end.  Consequently  the  adjustments  in  Eng- 
land are  a  little  slow,  difficult,  and  expensive.  The  English 
rule  is  nevertheless  retained  because  it  is  calculated  to  effect 
more  even  and  exact  justice;  and  the  difficulties  in  adjust- 
ments do  not  seem  to  be  serious.  The  testimony  of 
Messrs.  Gill  and  Clynes  before  the  N".  Y.  Employers'  Liability 
Commission  (Minutes  of  Evidence,  1910,  pp.  77,  90)  was  to 
the  effect  that  compensation  in  England  is  prompt  and  "  auto- 
matic." And  on  the  other  hand  the  German  practice  sometimes 
results  in  compensation  exceeding  previous  earnings. 

(3)  This  system  starts  with  a  maximum  strain  upon  indus- 
tries. The  meaning  of  this  is  that,  upon  the  adoption  of  the 
direct  compensation  liability,  employers,  if  they  insure,  must 


*  In  Germany  300  times  the,  daily  wage  for  the  day  of  injury  is  the 
general  rule  prescribed  in  the  law  for  estimating  yearly  earnings. 


49 

start  in  abruptly  to  pay  premiums  sufficiently  high  to  establish 
reserves  to  cover  the  capitalized  values  of  liabilities  accruing 
during  the  period  paid  for  —  which  premiums  will  undoubtedly 
be  so  much  higher  than  for  insuring  the  liability  for  negligence 
as  to  cause  some  embarrassment  at  first;  whereas  under  the 
German  system  only  payments  due  for  the  first  year  need  be 
provided  for  by  the  first  year's  assessment-premiums,  and  the 
future  payments  upon  accrued  pension  liabilities  may  be  left 
to  be  provided  for  by  future  assessments,  and  the  increase  in 
premiums  is  thereby  made  gradual.  But  there  are  serious 
objections*  to  the  German  method, —  it  is  too  much  like  issuing 
bonds  to  pay  for  current  expenses.  And  it  is  to  be  noted  that 
British  industries  have  passed  through  the  period  of  initial 
strain  without  material  embarrassment,  and  now  have  the  ad- 
vantage of  solvent  insurance.  And  it  is  also  to  be  noted  that  all 
other  countries  except  Germany  have  elected  to  meet  the  initial 
strain  of  the  increased  liability  at  once,  without  attempting  to 
distribute  it. 

(4)  This  system  withdraws  a  maximum  amount  of  capital 
from  industries.     This  objection  is  simply  a  corollary  of  the 
proceeding,  and  means  that  the  heavy  premiums  paid  into  in- 
surance reserves  are  withdrawn  from  industry,  whereas  under 
the  German  system  employers  are  allowed  to  retain  and  use  in 
their  industries  a  large  part  (i.  e.  that  part  not  yet  due  and 
payable  to  the  beneficiaries)  of  the  moneys  for  which  they  are 
indebted  for  compensation.     The  economic  theory  underlying 
this  objection  requiries  demonstration;  for  it  is  the  general 
opinion  that  the  money  paid  for  insurance  reserves  is  not  locked 
up  in  vaults,  but  is  invested,  and  that  a  fair  proportion  of  it 
finds  its  way  back  into  industry. 

(5)  This    system    causes    discrimination    in    employment 
against  the  aged.      This  subject  has  already  been  fully  con- 
sidered;  (see  "Abuses").       If  the  objection  is  to  be  deemed 
material,  it  may  easily  be  avoided  by  minor  amendment  to  per- 
mit old  men  to  contract  for  a  sliding  scale  of  compensation, 


*  See  "  The  German  Law,"  post. 


50 

dependent  upon  age,  as  is  now  being  advocated  in  England. 
And  it  is  to  be  noted  that  none  of  the  compensation  laws,  except 
possibly  those  of  Norway  and  E~ew  South  Wales,  altogether 
escape  it. 

The  following  additional  criticisms  of  the  English  law  are 
sometimes  advanced. 

(1)  That  the  British  working  people  are  dissatisfied  with 
it.    Against  this  assertion  may  be  cited  to  the  contrary  the  testi- 
mony of  Messrs.  Gill  and  Clynes,  Laborite  members  of  the 
British  Parliament,  before  the  E"ew  York  Employers'  Liability 
Commission;  (see  "Minutes  of  Evidence,  1910",  pp.  75,  76, 
84).     Mr.  Gill  testified,  however  (p.  82),  that  there  was  some 
"  slight "  agitation  for  state-insurance.     The  reasons  for  this 
agitation  deserve  notice.    The  demand  for  state-insurance  comes 
principally  from  the  more  socialistic  labor  unions.    The  avowed 
reasons  for  it  are  that  under  state-insurance  adjustments  would 
be  made  by  state  officials  instead  of  by  insurance  companies  or 
employers  and  would  therefore  be  "  fairer  ",  that  there  would 
be  no  discrimination  in  employment  against  the  aged  and  in- 
firm, and  that  there  would  be  absolute  security  for  the  payment 
of  compensation.       But  behind  these  alleged  reasons  lies  con- 
cealed the  principal  motive  of  those  who  promote  the  agitation, 
which  is  that  general,  bureaucratic  state-insurance  is  the  next 
step  on  the  program  of  the  Eabian  socialists  in  the  direction 
of  complete  socialism. 

(2)  That   the   International   Social   Insurance    Congresses 
(held  in  Borne  in  1908  and  at  The  Hague  in  1910)  have  de- 
clared that  compulsory  insurance  is  the  best  and  most  efficient 
means  of  reducing  human  and  economic  loss  from  sickness, 
work-accidents  and  disability.     Although  in  sympathy  with  the 
general  thought  and  conclusions  of  these  congresses  it  should  be 
noted,  (1)  that  the  direct  liability  for  compensation  is  itself  in- 
surance and  complies  with  the  requirements  of  this  doctrine 
so  far  as  the  absence  of  further  security  does  not  result  in 
loss  of  compensation  benefits,  and  (2)  that  the  attendance  at 
these  congresses  has  been  composed  principally  of  enthusiasts 


51 

in  "  social  insurance  "  and  consequently  that  their  declarations 
on  the  technical  subject  of  prevention  of  work-accidents  have 
not  the  weight  due  to  the  opinions  of  experts  in  industrial  safety. 

The  French  Law.  The  compensation  law  of  France  has 
developed  piecemeal  and  is  to  he  found  in  various  statutes.  So 
much  of  it  as  applies  to  the  principal  industries*  may  be  sum- 
marized as  follows  :  The  employer  is  directly  liable  for  compensa- 
tion to  his  injured  workmen  —  the  liability  including  an  obliga- 
tion to  provide  or  pay  for  all  medicines,  surgical  appliances 
and  medical  and  surgical  treatment  made  necessary  by  the  in- 
jury. The  employer  may  free  himself  from  this  contingent  lia- 
bility by  insuring  in  an  approved  mutual  aid  or  guaranty  asso- 
ciation or  insurance  company.  He  may  also  free  himself  from 
his  contingent  liability  for  fatal  or  permanent  injuries  by  in- 
suring in  the  National  Accident  Insurance  Fund.  He  may 
discharge  his  accrued  liabilities  for  pension  payments  for  fatal 
and  permanent  injuries  by  the  purchase  from  the  said  fund  of 
annuities  covering  such  pensions.  He  may  also  free  himself 
from  his  contingent  liability  for  compensation  payments  and 
for  medical  care,  ete.,  during  a  period  not  exceeding  90  days 
following  injury,  by  procuring  his  employees  to  belong  to  a  sick- 
ness insurance  scheme  to  cover  such  period,  provided  that  he 
contributes  at  least  one-third  towards  the  expenses  of  such  in- 
surance. All  employers  covered  by  the  law  are  taxed  by  the 
state  for  a  guarantee  fund,  out  of  which  compensation  for  death 
or  permanent  injury  is  payable  where  the  employer  or  insurer 
liable  defaults.  An  injured  workman  is  given  a  preferential 
claim  for  the  amount  of  his  compensation  against  the  assets  of 
an  uninsured  employer.  And  where  the  guarantee  fund  pays 
the  compensation  it  is  given  a  like  preference  against  the  assets 
of  the  employer  or  insurer  liable. 

The  French  law  emphasizes  the  distinction  between  perma- 
nent and  temporary  injuries.  It  was  apparently  supposed  that 
the  cost  of  compensating  for  temporary  injuries  would  be 
comparatively  light  and  that  employers  would  be  able  to  defray 

*  Laws  of  1898,  1902,  1905,  1906,  1907. 


52 

it  as  part  of  current  expenses  without  material  embarrassment, 
but  that  for  the  heavy  burden  of  the  charges  for  long  continuing 
pensions  for  fatal  and  permanent  injuries  it  was  desirable  to 
provide  some  special  means  of  insurance.  Accordingly  the 
National  Accident  Insurance  Fund  was  organized  to  sell  in- 
surance covering  such  injuries  at  cost,  and  another  special  fund 
was  set  up  to  guarantee  the  payment  of  compensation  for  such 
injuries.  But  in  practice  the  cost  of  compensating  for  tem- 
porary injuries  —  including  the  cost  of  providing  medical  care, 
etc., —  has  far  exceeded  all  calculations.  In  1910  it  was 
estimated  to  be  29. 71$  of  premiums  —  10.05$  of  the  total  being 
for  medical  expenses  alone.  (See  "  Cost  of  Workmen's  Compen- 
sation ",  Market  World  &  Chronicle,  1912,  pp.  13.  14.)  Conse- 
quently insurance  in  the  National  Accident  Insurance  Fund 
has  become  negligible;  and  insurance  in  France  is  distributed 
as  follows  (roughly)  : — 

French  mutual  societies  25$ 

French  stock  companies  51$ 

French  trade  syndicates  8$ 

Foreign  stock  companies  16$ 

Unfortunately,  however,  these  companies  have  under- 
estimated the  cost  of  compensation,  and  have  persistently  kept 
their  rates  too  low.  Although  they  have  raised  them  from  an 
average  of  1.53$  (of  payrolls)  in  1901  to  1.85$  in  1906  and 
to  2.32$  in  1907,  nevertheless  in  1910  they  still  showed  de- 
ficiencies of  expenditures  and  liabilities  over  premium  receipts 
to  date,  ranging  from  26$  for  the  French  stock  companies  up 
to  79$  for  the  trade  syndicates.  French  employers  in  the 
hazardous  industries  are  now  complaining  bitterly  of  the  burden 
of  the  high  rates  and  of  the  abuses  of  the  law.  But  it  is  mani- 
fest that  the  rates  must  go  higher;  and  it  seems  probable  that 
political  influences  will  prevent  a  correction  of  the  abuses.  The 
opinion  on  the  ground,  so  far  as  the  writer  could  gather  it  from 
confidential  sources,  is  that  the  French  law  is  a  good  law  —  al- 
though a  little  "  messy  " —  gone  wrong  through  politics. 


53 

Coming  on  top  of  the  direct  liability,  the  tax  for  the  guar- 
anty fund  (see  "  Guarantee  Insurance  ")  is  not  submitted  to 
amiably  by  employers.  It  is  a  light  tax,  but  bothersome ;  and 
much  of  it  is  consumed  in  the  expenses  of  collection.  It  con- 
tinually and  uselessly  raises  the  often  doubtful  question  of 
permanency  of  injury.  It  leads  permanently  injured  workmen 
to  look  primarily  to  the  state  for  the  collection  for  their  dues. 
And  manifestly  the  method  of  maintaining  the  fund  is  less  fair 
than  the  Belgian  method  and  less  beneficial  industrially  than 
the  Italian.*  Whether  or  not  a  somewhat  similar  system  of 
taxing  all  employers  to  guarantee  all  compensation  would  be  sat- 
isfactory in  a  state  where  employers  are  not  otherwise  harried 
to  death  by  multiplied  taxation  and  bureaucratic  exactions,  may 
be  a  doubtful  question.  But  it  is  the  writer's  emphatic  opinion 
that,  unless  the  workmen  contribute  substantially,  it  would 
work  badly. 

The  German  Law.  The  German  system  of  workmen's 
insurance  is  a  Pr°ductpf  gradual  but  systematic  growth  and 
extension.  It  is  now^alrincorporated  in  the  Workmen's  Insur- 
ance Code  of  July  19,  1911f  (to  take  effect  January  1,  1913). 
That  codification  has  made  no  important  changes  in  the  prior 
laws ;  but  in  the  minor  particulars  in  which  changes  have  been 
made  the  Code  is  followed  Jierein. 

The  Workmen's  Insurance  Law  is  divided  into  three  parts: 
the  sickness  insurance  law,  the  work-accident  compensation 
insurance  law,  and  the  disability  insurance  law.  Each  of  these 
three  constitutes  a  distinct  branch  of  law,  although  all  three 
(and  more  especially  the  first  two)  are  intimately  correlated.^: 

The  accident  compensation  insurance  law  is  in  turn  divided 
into  three  branches:  the  industrial  accident  insurance  law,  the 

*  See  "  Guarantee  Insurance,"  supra. 

f  See  Bulletin  of  The  Bureau  of  Labor,  No.  96.  The  earlier  work- 
accident  insurance  laws  were  enacted  in  1884,  1886,  1887,  and  1900. 

t  Nevertheless  they  are  so  imperfectly  correlated  that  there  are  many 
incidental  abuses  and  excessive  red  tape.  The  drift  of  opinion  is  in  the 
direction  of  extending  sickness  insurance  to  cover  accident  insurance;  but 
how  to  do  that  without  abandoning  all  the  >good  points  of  the  accident 
insurance  law  is  an  unsolved  problem. 


54 

agricultural  accident  insurance  law,  and  the  navigation  insur- 
ance law.  The  first  is  the  law  which  is  held  up  for  emulation 
in  comparison  with  other  compensation  laws,  which  has  been 
referred  to  as  "  the  German  law  "  throughout  this  paper,  and 
to  which  we  will  principally  devote  out  attention.  The  third  is 
comparatively  unimportant.  The  second  will  be  referred  to 
briefly  later. 

The  organization  and  methods  of  the  industrial  accident 
insurance  associations  have  already  been  partially  described; 
(see  "The  Liability'7;  "Security";  "Mutual  Insurance7'; 
"Bates";  "Iteserves";  "Cost";  "Accident  Reduction"; 
"Adjustments  ",  etc.).  Besides  in  the  "  associations  ",  accident 
compensation  insurance  for  their  workmen  is  carried  by  the 
Empire,  the  Federal  States  and  other  public  bodies,  and,  for 
petty  employers  in  certain  trades,  by  "  branch-institutes  ".  The 
associations  are  all  self-governing  bodies,  managed  by  the  con- 
tributing employers,  but  over  which  the  state  exercises  control 
and  supervision.  The  branch  institutes  are  managed  by  the 
governing  body  of  the  association  of  which  they  are  respectively 
branches.  By  starting  work  in  any  trade  an  employer  becomes 
ipso  facto  a  member  of  an  association  or  branch-institute. 

The  advantages  of  the  German  industrial  accident  compen- 
sation insurance  law  are  as  follows: 

(1)  It   results   generally    in   approximately    fair   rates. 
(See  "Bates"). 

(2)  The  delegation  of  quasi-public  powers  of  regulation 
and  inspection  to  the  employers'  associations  is  most  effec- 
tive for  accident  prevention.     The  associations'  regulations 
are  less  arbitrary  and  more  elastic  and  efficient  than  state 
regulations;*  and  their  inspection  is  better.       Under  this 
system  specialists  of  a  high  grade  devote  all  their  time  to  a 
study  of  the  hazards  of  a  particular  industry.     The  thought- 
less popular  criticism  that  such  inspectors  do  not  cover  the 
field  of  social   uplift,   but   concentrate   their   efforts   upon 
preventing  accidents,  "  in  the  interests  of  employers  in  order 


"*  Of.  Shadwell  on  "  Industrial  Efficiency. 


55 

to  reduce  the  costs  to  them/'  is  itself  evidence  of  proper  con- 
centration of  purpose. 

(3)  The  joint  liability  of  groups  of  employers  through 
their  respective  associations  gives  adequate  security  of  pay- 
ment and  yet  enables  employers,  by  omitting  "  capitalized- 
value  reserves  "  from  their  association  insurance  funds,  to 
retain  the  use  of  that  much  more  money  in  their  operations. 
This  practice,  however,  is  subject  to  the  disadvantages  and 
dangers  hereinafter  explained. 

(4)  Compulsory  insurance  in  this  one  form  for  all  elimi- 
nates the  extra  expenses  incidental  to  competition  in  insur- 
ance, and  yet  escapes  many  of  the  dangers  and  abuses  of 
monopolistic  state-insurance. 

(5)  The  well  known  efficiency  of  German  workmen  is 
often  cited  as  a  result  of  and  such  result  as  an  advantage 
of  this  law.    But  that  claim  begs  a  doubtful  question.    Prob- 
ably the  broad  system  of  workmen's  insurance  has  had  a  ma- 
terial effect  in  increasing  the  efficiency  of  the  German  work- 
men. But  would  it  have  been  any  less  effectual  had  that  part 
of  it  relating  to  work-accident  compensation  been  in  the 
English  form  —  or  in  any  other  successful  form  —  rather 
than  in  its  actual  form  ?   That  question  cannot  be  answered 
with  certainty  in  the  affirmative.   In  forming  a  judgment  on 
this  question  it  must  be  remembered  that  German  efficiency 
was  already  famous  before  the  workmen's  insurance  laws, 
and  that  it  is  generally  attributed  primarily  and  principally 
to  the  German  character,  to  compulsory  military  training  and 
to  widespread  vocational  .education. 

The  principal  disadvantages  of  and  objections  to  this  law 
are  as  follows : 

(1)  The  practices  of  the  associations  in  the  adjustment 
of  compensation  are  irritating  to  the  workpeople,  involve 
much  red-tape,  and  lead  to  much  litigation.     They  are  ap- 
parently less  satisfactory  than  the  freer  and  more  direct 
negotiations  of  the  English  employers  and  their  insurers. 

(2)  The  review  and  final  determination  of  awards  by 


66 

administrative  officers  of  the  Insurance  Office  has  led  to 
many  abuses  complained  of  —  with  some  exaggeration  per- 
haps — by  Herr  Friedensburg.  All  the  facts  available  indi- 
cate that  the  administration  of  the  insurance  law  is  power- 
fully influenced  by  a  desire  to  exercise  liberality  towards  the 
unfortunate  and  is  governed  by  the  spirit  of  benevolence 
rather  than  of  law.  Experience  everywhere  shows  that  such  a 
policy  produces  demoralizing  effects  and  carries  with  it  grave 
danger  of  fraud  and  abuse.  Throughout  all  civilization  such 
questions  as  are  involved  in  the  review  of  awards  generally 
are  determined  judicially,  that  is  by  courts  of  justice.  There 
is  no  wisdom  in  depriving  the  parties  of  their  right  to 
judicial  determination  of  such  questions ;  for  administrative 
boards  do  not  furnish  adequate  guaranty  of  impartiality  and 
strict  adherence  to  the  law.  (See  Henry  W.  Farnam  and 
Ernst  Freund,  The  Survey,  May  4,  1912,  pp.  243,  245; 
contra  H.  L.  Slobodin,  who  defends  the  practice  from  the 
standpoint  of  socialism,  id.,  p.  247.)  It  should  be  noted  that 
this  tendency  to  administer  charitable  relief,  not  contem- 
plated by  the  law,  is  to  some  extent  checked  in  Germany  by 
the  employers'  associations.  In  the  Norwegian  practice,  on 
the  contrary,  it  is  without  check.  The  contention  in  miti- 
gation that  the  perversion  of  a  law  of  private  rights  to  pur- 
poses of  public  charity  reduces  the  volume  of  necessary  poor 
relief  is  not  supported  by  figures. 

(3)  The  system  of  compulsory  membership  in  trade  asso- 
ciations has  this  advantage,  that  all  classifications  of  trades 
are  necessarily  arbitrary,  and  consequently  that  it  is  fre- 
quently an  uncertain  question  in  which  of  several  associa- 
tions an  establishment  should  properly  be  classed ;  and  that 
between  those  associations  there  are  often  serious  differences 
in  rates.  The  matter  of  assignment  to  an  association  and 
of  transfer  from  one  association  to  another  rests  in  the 
discretion  of  the  insurance  office.  There  are  consequently 
constant  appeals  for  transfers;  and  the  officials  are  subject 
to  diverse  and  strong  political  influences  in  regard  thereto. 


57 

And  transfers,  where  made,  entail  serious  embarrassments 
and  more  or  less  injustice  in  the  adjustment  of  accrued 
liabilities. 

(4)  The  legalized  practice  of  the  majority  of  the  insur- 
ance associations  in  omitting  to  carry  "  capitalized  value  " 
reserves,  and  in  depending  upon  current  assessments  to 
meet  the  payments  upon  accumulated  pensions  as  they  fall 
due  (see  "Reserves"),  is  subject  to  the  following  objec- 
tions : 

(a)  While  it  starts  off  with  pleasingly  low  rates,  it  must 
eventually  result  in  unduly  high  rates.     The  universal  satis- 
faction at  first  felt  Avith  the  German  law  was  consequently 
ephemeral.      That  condition  has  passed.      There   are  now 
loud  complaints  from  employers,  and  their  dissatisfaction 
will  increase,  as  rates  continue  to  rise,  as  they  must  for 
many  years  to  come.     The  rates  in  Germany  today  average 
about  double  what  they  were  in  the  beginning.     It  is  cal- 
culated that  they  will  not  reach  their  stable  maximum  until 
some  20  years  more.     How  much  higher  they  will  then  be 
no  one  knows,  but  the  majority  guess  is  that  they  will  again 
double.* 

(b)  This  practice  conceals  the  cost  of  insurance.    No  one 
knows  what  is  the  true  cost  of,  as  distinguished  from  the 
current  price  charged  for,   insuring  compensation  in  any 
given  trade  in  Germany  today. 

(c)  This  practice  once  embarked  upon,  the  law  cannot 
be  changed  without  serious  embarrassments;  for  there  are 
heavy  liabilities   to   be   liquidated.      The   figures   for   the 
industrial  associations  alone  are  not  available;  but  the  out- 
standing capitalized  liabilities  of  all  the  German  accident 
associations  in  1910  were  estimated  at  1,142,000,000  marks 
($271,900,000),     their    reserves     at     318,900,000     marks 
($75,930,000),  and  their  deficiencies  at  823,100,000  marks 
($195,970,000).      The  English  law,  per  contra,  could  be 
radically  changed  tomorrow,  if  deemed  desirable,  without 
disturbing  existing  insurance. 


Schwedtman  and  Emery,  pp.  146-7. 


58 

(d)  This  practice  handicaps  new  establishments  by  com- 
pelling them  to  assume  the  liability  for  and  to  pay  a  material 
proportion  of  the  losses  of  their  pre-established  competitors. 
And  it  imposes  upon  successful  establishments  the  burden  of 
liability  for  pensions  for  injuries  incurred  in  establishments 
of  defunct  and  insolvent  competitors.     This  may  have  been 
the  cause  of  the  abnormally  high  rates  in  some  associations ; 
e.  g.  tanneries.     It  is  obvious  that  if  a  large  proportion  of 
establishments  in  any  trade  should  shut  down  the  financial 
liability  thereby  dumped  upon    the    survivors    would    be 
ruinous.     In  this  respect  the  dangers  and  defects  of  the 
German  industrial  accident  insurance  are  analogous  to  those 
of  voluntary  mutual  life   insurance  —  with  which  we  in 
America  are  familiar. 

(e)  Finally  this  practice  is  subject  to  the  danger  that  the 
accumulated   liabilities   of   the   associations,   which   are   in 
effect  mortgages  on  the  various  branches  of  industry,  may 
become    so    burdensome    in    a    period    of    depression    and 
contraction,    as    to    crush    the    industries    of    the    country 
affected  in  competition  with  the  industries  of  other  coun- 
tries not  similarly  burdened.     To  meet  the  increasing  cost 
of  overhead  charges  for  past  indebtedness  in  a  period  of 
continued  prosperity,  rising  prices  and  expanding  industry, 
such  as  Germany  has  enjoyed  for  many  years,  is  compara- 
tively easy.    But  to  liquidate  a  heavy  indebtedness,  carried 
over  from  the  past,  under  opposite  conditions  is  an  entirely 
different  matter,  and  may  hurt. 

(5)  It  is  a  disputed  question  whether  insurance  in  each 
and  all  of  'the  German  trade  associations  adequately  "  dis- 
tributes the  risk."  Probably  those  associations  are  all  large 
enough  to  do  so.  But  in  a  smaller  state  —  e.  g.  in  Norway 
or  in  a  majority  of  the  states  of  the  United  States  —  there 
would  be  many  trade  classes  in  which  there  would  be  too 
few  establishments  with  too  small  aggregate  assets  to  pro- 
vide anything  like  adequate  risk  distribution.  Truly  unfor- 
tunate would  be  the  plight  of  a  responsible  manufacturer 
who  should  be  forced  into  a  blind  pool  with  a  few  compara- 


59 

tively  irresponsible  competitors  and  saddled  with  a  joint 
liability  for  the  risks  of  all.  A  good  illustration  of  the  evil 
of  insufficient  risk  distribution  is  the  case  of  the  Dupont  Co. 
in  Washington,  explained  above  under  the  head  of  "  Acci- 
dent Reduction." 

(6)  **An  objection,  not  to  this  law  per  se,  but  to  our  using 
it  as  a  model  for  imitation,  is  that  it  is  not  suitable  to  con- 
ditions in  America.  It  rests  upon  a  basis  of  complete 
bureaucracy,  and  the  trade  associations  derive  all  their 
efficiency  from  a  delegation  of  governmental  powers,  for- 
bidden by  our  constitutions  and  political  principles.  (See 
Erank  E.  Law,  Adelbert  Moot  and  Hugh  E.  Eox,  the  Survey, 
May  4,  1912,  pp.  241-3-8;  contra  C.  W.  Doten,  E.  C. 
Schwedtman  and  Chas.  R.  Henderson,  id.,  pp.  246-8-9.) 
In  this  connection  it  should  be  borne  in  mind  that  the  legal 
power  of  control  over  the  establishments  of  their  members 
is  the  vital  feature  of  the  industrial  associations,  and  that 
without  that  power  compulsory  mutual  insurance  would 
inevitably  be  seriously  harmful.  A  sufficient  objection  to 
present  consideration  of  this  law  as  a  model  for  imitation  is 
that  no  one  in  America  has  ever  been  able  to  formulate 
anything  like  a  suitable  adaptation.  Whatever  may  be  con- 
tended for  the  compensation  laws  of  Washington,  Ohio  and 
Massachusetts,  certainly  none  of  them  resembles  the  German 
law  we  are  considering  either  in  principles  or  in  essential 
methods.* 

Allowing  due  weight  to  the  foregoing  objections  to  the 
industrial  accident  insurance  law  of  Germany,  it  should  never- 
theless be  recognized  that  many  of  them  relate  to  details,  which 
if  deemed  objectionable,  could  be  corrected  without  affecting  the 
essence  of  the  system. 

The  German  Agricultural  accident  insurance  law 
differs  radically  from  the  industrial  law.  Employers  are  or- 
ganized into  associations  by  territorial  districts,  rates  are  levied 

*  For  further  objections  see  Report  of  Congressional  Commission  on 
Employers'  Liability,  p.  58, 


60 

uniformly  like  taxes,  and  the  management  is  largely  confided 
to  local  officials  and  is  becoming  more  and  more  bureaucratic 
and  political.  The  abuses  of  this  law  may  be  exaggerated  by 
Herr  Frieclensburg,  but  they  are  certainly  far  more  serious 
than  is  officially  admitted.  And  this  form  of  insurance  has  no 
effect  in  the  direction  of  accident  prevention,  except  to  pro- 
duce the  data  upon  which  to  base  police  regulations.  It  is  sig- 
nificant that  when  the  German  accident  compensation  law  is 
held  up  for  our  admiration,  it  is  always  the  industrial  accident 
law  that  is  described. 

The  Norwegian  Law.  Under  this  law  the  employer  is 
relieved  of  all  individual  responsibility  for  compensation.  The 
state  has  assumed  the  direct  liability  therefor,  and  pays  all  com- 
pensation out  of  a  fund  maintained  by  taxing  all  employers  in 
the  industries  covered.  The  state  insurance  office  assigns  the 
establishments  in  those  industries  to  different  trade-classes,  and 
taxes  them  according  to  a  rough  estimate  of  the  risk  in  the  re- 
spective classes.  The  state  pays  the  expenses  of  management 
of  the  insurance  office,  adjustments  are  made  by  communal 
officials,  premiums  are  likewise  collected  by  them,  and  compen- 
sation payments  are  made  through  the  Post  Office.  The  in- 
surance fund  is  required  to  be  maintained  on  a  reserve  or 
"  capitalized  value  "  basis  as  distinguished  from  an  assessment 
basis.  In  the  desire  for  cheapness  rates  were  at  first  placed  too 
low,  with  the  result  that  a  deficit  of  about  $100,000  was  soon 
incurred,  which  was  made  good  by  appropriation  from  the 
general  funds.  Since  then  the  fund  is  supposed  to  have  been 
maintained  approximately  solvent. 

The  one  advantage*  of  the  Norwegian  system  is  that  it  is 
suitably  to  the  peculiar  conditions  in  Norway.  Norway  is  a 
thinly  populated  country  with  small  scattered  communities  and 
industries,  and  with  difficult  means  of  intercommunication. 
The  German  system,  after  which  it  was  the  original  intention 


*  The  idea  that  the  Norwegian  system  would  have  an  advantage  for 
us  in  avoiding  constitutional  objections  was  fairly  disposed  of  before  the 
Congressional  Commission  on  Employers'  Liability;  see  the  writer's  brief 
before  that  commission,  Hearings,  pp.  599,  608. 


61 

to  model  the  Norwegian  law,  was  thought  to  be  impracticable 
there  because  the  few  widely  distributed  employers  in  each 
trade  could  not  co-operate  effectively  in  organization,  and  be- 
cause there  are  not  enough  employers  with  sufficient  assets  in 
each  trade  to  provide  an  adequate  distribution  of  the  risks.  For 
similar  reasons  private  insurance  would  be  inconvenient  and 
expensive.  Under  such  conditions  general  co-operation  and 
the  use  of  existing  state  machinery  has  special  advantages,  while 
on  the  other  hand  the  principal  abuses  of  state  management,— 
exaggerations  and  impostures  on  the  part  of  workmen,  and 
favoritism  to  particular  employers, —  are  Jess  to  be  feared,  be- 
cause less  apt  to  escape  public  attention. 

Combined  security  and  cheapness  are  also  alleged  ad- 
vantages of  this  system;  but  these  alleged  advantages  are  to  be 
questioned.  Probably  the  Norwegian  is  the  cheapest  method 
to  provide  insurance  under  the  particular  conditions;  and  cer- 
tainly state  monopolistic  insurance  avoids  the  multiplication  of 
some  expenses,  incidental  to  competition.  But,  £s  has  already 
been  noted,  insurance  costs  employers  about  as  much  in  Norway 
as  in  England,  although  the  expenses  of  management  in  Norway 
are  shifted  onto  the  public  while  in  England  they  are  included 
in  the  rates;  (see  "  Cost  of  Insurance  "). 

Against  these  advantages,  real  or  alleged,  the  Norwegian 
system  as  a  model  for  imitation  is  subject  to  the  following  grave 
objections. 

(1)  By  flat  rates  the  employer  is  relieved  from  all  in- 
dividual financial  responsibility  for  injuries  incurred  in  his 
employment,  and  consequently  from  all  material  inducement 
to  prevent  accidents  therein.  On  the  contrary,  where  his  trade 
is  given  too  low  a  rate  —  and  up  to  recent  date  the  rates  of  the 
Norwegian  insurance  office  for  a  large  proportion  of  trades  were 
far  below  cost  —  the  employer  is  encouraged  to  maintain  cheap 
methods  and  practices  of  production  which  are  unnecessarily 
hazardous.  It  is  true  that  the  state  insurance  office  may  study 
— as  the  Norwegian  office  is  studying  —  to  fix  its  rates  correctly ; 
but  in  the  controlling  desire  for  cheapness  of  management  it  is 
too  apt  to  neglect  —  as  the  Norwegian  office  has  neglected  — 


62 

the  expensive  investigations  required  to  ascertain  what  are  the 
proper  rates.*  Of  course  the  state  insurance  office  may  adopt 
the  alternative  practice  of  differentiating  rates  for  particular 
establishments  in  its  discretion.  But  the  mere  suggestion  that 
rates  may  be  so  shaded  for  the  benefit  of  individuals  would  give 
rise  to  charges  of  favoritism  and  suspicions  of  graft  that  would 
neutralize  any  benefits  from  the  pracice.  And  this  is  so  evident 
that  the  Norwegian  insurance  office  has  never  ventured  to  dis- 
criminate between  establishments  in  the  same  trade  class.  It 
may  be  contended  plausibly  that  the  state's  office  can  solve  this 
problem  by  further  differentiation  in  its  schedules ;  but  experi- 
ence is  convincing  that  no  hard  and  fast  schedules  of  rates  can 
be  framed  that  will  result  in  such  proper  differentiation  between 
competitors  as  prevails  in  Great  Britain  and  Germany  and  as  is 
essential  to  accident  prevention.  Moreover  to  arrive  at  a  gen- 
eral and  fair  differentiation  of  rates  would  require  such  an 
expensive  addition  of  experts  in  the  field  and  office  forces  as 
would  sacrifice  the  cheapness  of  management  which  seems  to  be 
the  sole  aim  and  advantage  of  Norwegian  insurance.  So  far 
as  experience  goes  political  insurance  schemes  are  irremediably 
inconsistent  with  accident  prevention.  And  for  that  reason,  if 
for  no  other,  they  will  be,  in  the  long  run,  the  most  expensive. 
(2)  The  individual  employer  is  absolutely  at  the  mercy  of 
a  bureaucratic  administration,  which  may  assign  his  establish- 
ment to  whichever  of  several  classes  of  industry,  with  widely 
different  risk  rates,  it  chooses,  and  may  fix  the  premium  rate  for 
his  industry  as  it  chooses.  We  have  no  reason  to  suppose  that 
the  Norwegian  Insurance  Office  has  intentionally  misused  its 
discretion  in  this  regard;  but  the  opportunities  for  favoritism 
and  oppression  in  this  particular  are  tremendous  —  for  a  dif- 
ference in  rates  between  two  similar  establishments  in  close 
competition  may  be  destructive  to  one  of  them.  If  a  board  of 


*  It  is  not  meant  to  be  intimated  that  rates  can  be  correctly  fixed 
without  long  and  wide  experience.  But  there  is  a  vast  difference  in  fair- 
ness betwen  rates  fixed  by  careful  investigations  of  actual  conditions  in 
the  field  and  rates  fixed  by  guesswork  in  the  office. 


63 

"  ward  heelers  "  should  get  control  of  such  an  office,  its  friends 
would  he  enriched  and  its  enemies  ruined. 

(3)  The  insurance  office  makes   adjustments   and   awards 
through  its   administrative  agents.        The  weight  of  political 
influence  will  almost  always  he  in  favor  of  an  award,  although 
the  claim  may  be  most  doubtful,  and  of  the  highest  amount 
claimed.      And  particularly   strong  will  he  the  neighborhood 
influence  and  the  tendency  to  stretch    the    law,    where    local 
officials  are  entrusted  blindly  with  the  function  of  making  ad- 
justments and  awards.     There  is  simply  no  limit  to  the  per- 
version of  the  law  probable  under  such  a  practice  if  the  govern- 
ment officials  are  lax,  corrupt,  subject  to  political  influences  or 
imbued    with    altruistic    ideas    of    dispensing    indiscriminate 
charity  with  other  people's  money.     It  is  largely  because  state- 
insurance  has  this  tendency  and  furnishes  so  facile  a  method  of 
draining  private  wealth  into  the  pockets  of  the  "  proletariat ", 
regardless  of  the  truth  and  legality  of  their  claims,  that  socialists 
demand  it.     It  is  perfectly  obvious  that  if  we  do  not  want  to 
build  up  a  class  of  parasites  on  industry  this  method  of  adjust- 
ment must  be  avoided. 

(4)  Between  the  tendency  on  the  one  hand  to  favor  em- 
ployers with  low  rates  and  on  the  other  hand  to  favor  workmen, 
with  liberal  awards  all  political  insurance  (of  which  this  is  the 
purest  form)   is  peculiarly  apt  to  result  in  deficiencies  in  re- 
serves ;  and,  where  a  deficiency  exists,  to  shift  the  burden  thereof 
on  to  taxpayers  generally.    That  is  a  miscarriage  of  the  law,  and 
contrary  to  its  whole  purpose  and  intent.     It  amounts  in  effect 
to  subsidizing  hazardous  industries.     Such  a  miscarriage  has 
already    occurred    in    Norway,    where    a    deficiency    of    about 
$100,000  was  made  good  out  of  the  general  funds;  and  while 
that  amount  may  seem  trifling,  under  conditions  in  Norway, 
it  is  the  equivalent  of  about  $1,000,000  in  New  York  State  or 
$5,000,000  in  Great  Britain.     Heavy  deficiencies  now  exist  in 
the  reserves  of  the  politically  controlled  accident  insurance  asso- 
ciations of  Austria;   and  consequently  a  political  struggle  is 
going  on  there  to  shift  those  deficiencies  onto  the  public.   Under 


64 

a  direct  liability  law  or  the  German  system  there  is  little  or  no 
danger  of  such  perversions  of  the  compensation  law. 

(For  a  more  elaborate  presentation  of  the  political  dangers 
of  state-insurance,  see  the  writer's  brief,  filed  with  Congressional 
Commission  on  Employers'  Liability,  1911  (Hearings,  Pt.  2, 
p.  590)  ;  and  also  articles  by  Henry  E.  Seager,  Frank  E.  Law 
and  Adalbert  Moot  (The  Survey,  May  4,  1912,  pp.  239-244).) 

Bibliography. 

Willoughby,  W.  F.    Workingmen's  Insurance.     Crowell  &  Co., 

1ST.  Y.,  1898.     (Out  of  date,  but  a  good  introductory  to  the 

problems  of  compensation  insurance.) 
Zacher,  Georg.     Die  Arbeiter  Versicherung  im  Auslade.     (An 

analysis  of  nearly  all  the  European  laws.) 
Aronson,  V.  R.     The  Workmen's  Compensation  Act  of  1906. 

London;  Unwin;  1909.  (An  analysis  of  the  British  law.) 
Foot,  Alfred.  The  practice  of  Insurance  against  Accidents  and 

Employer's  Liability.     London,  1909. 
Farnani,  Henry  W.    Articles  on  German  Workmen's  Insurance. 

Yale  Insurance  Lectures,  1904;  and  Yale  Review,  1904-5. 
Frankel  &  Dawson.  Workingmen's  Insurance  in  Europe. 

INT.  Y.,  Charities  Publication  Committee,  1909. 
Schwedtman   and  Emery.      Accident  Prevention   and  Relief. 

New  York,  1910. 

Friedensburg,  Ferdinand.     The  Practical  Results  of  Working- 
men's  Insurance  in  Germany. 
"  Cost    of    Workmen's     Compensation ",     Market    World    & 

Chronicle,  E".  Y.,  1912.     (Some  recent  data  on  European 

insurance. ) 
Bulletin  of  Bureau  of  Labor,  No.  90.     (A  compendium  of  the 

foreign  compensation  laws,  with  data  by  Mr.  Dawson  on 

insurance. ) 
"  The  Survey  "  E".  Y.,  May  4,  1912.     (Contains  a  reply  to  Herr 

Friedensburg  by  Dr.   Brodsky,   and  a  symposium  on  the 

German  compensation  insurance  law.) 
Report  of  and  Hearings  before  the  Congressional  Employers' 

Liability  and  Workmen's  Compensation  Commission.     (Dis- 


66      :'""  -'-  :    :::v- :••':•  ::  - 

cussion  of  the  question  of  insurance,  and  briefs  by  Mr. 
Dawson  in  favor  of  the  German  system  of  insurance,  by  Mr. 
Sherman  against  state-insurance,  and  by  Mr.  C  alder  on  the 
subject  of  accident  prevention.) 

Report  of  Imperial  German  Government  Commission  on  Work- 
men's Insurance.  (Reichstag  Document  No.  340,  1909-10.) 

Report  of  Departmental  Committee  on  Accidents; — Summary 
of  conclusions  in  Annual  Report  of  the  British  Chief  In- 
spector of  Factories  &  Workshops,  p.  vii,  Parliamentary 
Papers  for  1911,  Cd.  5963  (5535?). 

Graves,  Will  G.  A  Novelty  in  Legislation.  (Pamphlet)  (A 
criticism  of  the  Washington  Law.) 

"  Human  Engineering ",  Vol.  II,  'No.  1.  Cleveland,  1912. 
(Contains  an  appreciative  summary  by  the  Washington  in- 
surance officials  of  the  operations  of  their  law.) 

Sherman,  P.  Tecumseh.  Workmen's  Compensation  Acts. 
An  address  before  the  Massachusetts  Bar  Association,  Bos- 
ton, 1911.  (Pamphlet)  (The  effect  of  the  compensation 
liability  on  accident  prevention.) 

Lord,  J.  Walter.  Proceedings  of  Dep't  on  Compensation  of 
Xat.  Civic  Federation,  Dec.  8,  1911.  (A  comparative  esti- 
mate of  the  direct  compensation  liability  and  of  the  Mary- 
land miners'  insurance  law). 

Randolph,  Carman  F.  Brief  on  the  Legal  Aspects  of  Sys- 
tematic Compensation  for  Industrial  Accidents.  New  York. 
1910.  (Contains  an  instructive,  although  somewhat  hostile, 
analysis  of  the  compensation  laws.) 


INDEX. 


PAGE. 

Abuses          ........  39 

Accident  Reduction                ......  28 

Adjustment  and  Litigation                .....  35 

Bibliography             .......  64 

British  Law,  The   .        ,     .                            ....  45 

Compensation,  The                ......  3 

Cost  of  Insurance   .......  22 

Compensation   Insurance,    Purposes   of                       .              .              .  11 

French  Law,  The    .                            .....  51 

German  Law,  The   .......  53 

Guarantee    Insurance           .               .               .               .              .              .  17 

Mutual  and  Establishment  Fund  Insurance           .              .              .  15 

Liability,    The         .                             .....  5 

Norwegian  Law,  The            ......  60 

Premiums                  .               .               .               .               .              .              .  18 

Security       ........  9 

Rates                           .......  18 

Reserves       ........  21 

State    Insurance      .              .              .               .              .              .              .  13 

State    Fund   Insurance        .              .              .              .              .              .  14 

State  Insurance  in  Competition  with  Private  Insurance   .               .  41 

Stock  Company  Insurance  .               .               .               .               .              .  16 

Tendency     •  43 


67 


